Agriculture: Assistance Programmes

Baroness Byford: asked Her Majesty's Government:
	What practical help other than financial or grant-aided assistance they are offering to the agricultural sector.

Baroness Hayman: My Lords, given the extremely difficult conditions facing agriculture, the Government have introduced a range of help in addition to the substantial financial aid that has already been provided. This includes free business advice, training packages, action on planning issues and support for diversification. We have reduced regulatory burdens, including fewer but better co-ordinated farm inspections. We have also provided help for small abattoirs and secured EU support to maintain field margins and to deliver special help for arable farmers hit by flooding.

Baroness Byford: My Lords, I thank the Minister for her comments, which are most welcome. Does she accept that excessive regulation and high taxation currently being imposed on UK farmers is strangling the industry? The proposed pesticide tax, the climate change levy and the water Bill, which will directly affect farmers utilising the trickle-feed system, all add costs and burdens to the industry. Furthermore, does she agree that, when some 42,000--I repeat, 42,000--people have left farming over the past two years, this is not the right moment to increase the legislative burden on farmers? Indeed, it is totally unacceptable.

Baroness Hayman: My Lords, I do not think that we are increasing the legislative burden on farmers. We are providing support to help the industry become sustainable for the future. That means giving not only short-term financial assistance, substantial though that has been, but also providing support to farmers moving into areas that will be sustainable and profitable, and that will recognise their importance to the countryside and the environment in the future. I certainly do not agree that we have not recognised the particular needs of, for example, the horticulture industry as regards the climate change levy or the pig and poultry sectors by delaying the implementation of IPPC until 2007.

Lord Palmer: My Lords, does the Minister agree that the Government should consider offering more help to the bio-diesel industry which is environmentally friendly and would provide enormous help to an industry which is in dire financial straits?

Baroness Hayman: My Lords, the noble Lord is a strong advocate of bio-fuels. He will be well aware that the rural development programme contains a £30 million energy crops scheme to support planting and producer groups. Furthermore, we recognise the potential for liquid bio-fuels to contribute to reductions in greenhouse gas emissions. For that reason, the industry has been invited to submit proposals to the Green Fuels Challenge for significant reductions in duty on transport fuels.

Baroness Miller of Chilthorne Domer: My Lords, the Minister commented on the Farm Business Advisory Service. Welcome as the service is, with a budget of £8.5 million for this year, is she aware that, because this was the first year that such a service has been provided, the underspend is likely to be around £3 million? Can she confirm that that sum will be rolled over to next year's spend rather than clawed back by the Treasury? The scheme is new and it has taken some time for each region to get its programme off the ground.

Baroness Hayman: My Lords, I can certainly confirm that I am aware of the issue raised by the noble Baroness. We shall have to wait to see exactly the level of underspend because currently we are doing well in terms of meeting applications. The point made by the noble Baroness as regards the possibility of carry-over is presently being actively pursued in government.

Lord Stoddart of Swindon: My Lords, my noble friend referred to assistance being given to small abattoirs. Does she agree that small abattoirs are essential to many small farms and, indeed, to small butcheries? Bearing that in mind, can she tell the House how many small abattoirs have closed down since the Meat Hygiene Service took over, and whether that haemorrhage has now been stopped?

Baroness Hayman: My Lords, I am afraid that I do not have the figures for the number of small abattoirs that have closed. However, drawing on my knowledge from the days when I was responsible for the Meat Hygiene Service, I can tell my noble friend that although many abattoirs have closed over the past 20 to 25 years, that reflects a shifting pattern where some abattoirs close and others open. Indeed, I visited a farm where a small organic abattoir had recently opened. We recognise that many farmers wish to use small abattoirs in order to access local markets. To that end, the £8.7 million made available in the rural White Paper to support small abattoirs is extremely valuable to the sector.

Lord Tomlinson: My Lords, the Minister has referred to the current situation in agriculture and has recognised the difficulties. Is she aware that one of the main problems for farmers is the enormous amount of red tape and bureaucracy with which they are faced? Is she prepared to accept that something must be done to remove that burden in order to make life a little easier, at least so far as concerns farming operations?

Baroness Hayman: My Lords, the situation has been accepted. What we need now is better regulation, because we do not wish to see any unnecessary bureaucracy. That was why, in September 1999 we set up three industry-led red tape reviews and why we have acted upon them in areas such as those I have already mentioned--for example, co-ordinating farm inspections and reducing their number. Today we have published the Action Plan for Farming Bulletin, which provides an update for several of these areas. A copy has been placed in the Library of the House and I commend it to noble Lords. Furthermore, the Government will reply within the next few days to the report of the noble Lord, Lord Haskins, on better regulations.

Lord Tomlinson: My Lords, can my noble friend say whether her department is continually monitoring the impact on British agriculture of the United Kingdom being outside the single currency? Can she further say whether arrangements are being made to advise my right honourable friend the Chancellor of the Exchequer on this matter in order that he may take it into account when he is looking at his five criteria for membership?

Baroness Hayman: My Lords, I am not aware of any such formal arrangements being made within the Ministry at the moment. I shall certainly check. I can assure my noble friend that the issues in relation to the currency and their effect on British agriculture are frequently brought to the attention of agriculture Ministers.

Baroness Byford: My Lords, perhaps I may press the Minister further on her response to my supplementary question. How many of the other EU member states are passing on such costs to their farmers? If they are not, obviously our farmers are at a great disadvantage even within the EU, let alone globally.

Baroness Hayman: My Lords, the noble Baroness will understand that we are talking about a large number of countries responding to a large number of directives. I cannot from the Dispatch Box now give her details of implementation in every individual country in every individual instance. I accept the noble Baroness's basic point of trying to ensure a level playing field. That is why, for example, we were so pleased to see the action being taken under the Swedish presidency on animal welfare issues, particularly in relation to the pig sector.

Hiroshima and Nagasaki

Lord Jenkins of Putney: asked Her Majesty's Government:
	Whether they now condemn the bombing of non-combatants in Hiroshima and Nagasaki by nuclear weapons in 1945.

Baroness Scotland of Asthal: My Lords, we deeply regret the death of any non-combatant in war. However, we believe that the bombing of Hiroshima and Nagasaki in 1945 hastened the end of the Second World War, in which many millions had already perished.

Lord Jenkins of Putney: My Lords, is my noble friend aware that I am particularly well placed to recognise that the immediate reaction to that terrible deed was to rejoice? I was on a troop ship, embarked for the purpose of going to join an operational unit in Burma, during the period immediately following the dropping of the bomb on those two cities. I should like to report to my noble friend--

Noble Lords: Question!

Lord Jenkins of Putney: My Lords, I should like to ask the House whether it would care to hear what a Lance Corporal said to me as we were disembarking. A curious unease had settled on the ship and he said "Do you know, sir, what I think?" I said "No. What do you think?" He said "I think that they may have saved our lives at the cost of our children's".

Baroness Scotland of Asthal: My Lords, I am aware of my noble friend's valuable service during the last war. That service did him honour, as it did this country. I understand the sentiments that he expresses and the sentiments expressed by that Lance Corporal. However, at that time a judicious judgment was made on the clear basis of how to help millions of people. We cannot rewrite history, and that is how the matter stays.

Lord Renton: My Lords, is the noble Baroness aware that thousands of British prisoners of war were suffering terribly in South-East Asia--indeed, they were dying every day--and that the dropping of the second bomb helped to save their lives?

Baroness Scotland of Asthal: My Lords, I am aware of that terrible suffering. I can certainly reassure the House that the Government's approach to the need to address the issue of nuclear weapons very much takes into account the whole nature of the conflict and the sufferings that we all went through during that traumatic period.

The Lord Bishop of Bradford: My Lords, does the Minister agree that it seems to be a deeply regrettable nature of modern warfare that non-combatants are bombed and killed, whether it be in Dresden, Coventry, the City of London or in Sudan today? Can she confirm that the process of peace-making and the avoidance of war is at the very height of the Government's list of priorities?

Baroness Scotland of Asthal: My Lords, I am more than happy to give the right reverend Prelate that assurance. Peace is at the heart of our policies. We seek peace above all else.

Baroness Strange: My Lords, does my noble friend agree that, deeply regrettable as is the explosion of any atomic bomb, those particular bombs saved a great many British, American and Japanese lives?

Baroness Scotland of Asthal: My Lords, I made clear in my Answer that that was the assessment made at the time. There has been nothing since to cause us to change that assessment.

Lord Rea: My Lords, in the spirit of reconciliation, will my noble friend consider approaching the United States to express on behalf of the 1945 allies their regret that the measures they took to end the war in the Far East resulted in the deaths of so many non-combatants?

Baroness Scotland of Asthal: My Lords, these issues have been well trammelled since 1945. The basis upon which we all took part is clear. In 1998 the Japanese Government issued an apology in relation to their activity. We must be content with the position at which we have now all arrived.

Iraq

Lord Blaker: asked Her Majesty's Government:
	What is their policy towards Iraq in the light of the reports that it has resumed production of nuclear weapons.

Baroness Scotland of Asthal: My Lords, the Government share the concerns of the international community that Iraq may be taking advantage of the absence of United Nations weapons inspectors to rebuild its weapons of mass destruction. The United Kingdom remains fully committed to the full implementation of UN Security Council Resolution 1284. We call on Iraq to admit UN weapons inspectors immediately in accordance with its obligations under the relevant Security Council resolution.

Lord Blaker: My Lords, is not Saddam Hussein, regrettably, scoring successes in the propaganda war; and is that not weakening the position of the United Nations, whether in regard to sanctions or to the proposed resumption of inspections? Is it not a fact that United Nations sanctions have never banned imports of food or medicines into Iraq, and that the security resolution to which the Minister referred increased the limit of the oil that could be sold by Saddam Hussein to fund the humanitarian aid programme; and that, therefore, the privations of the people of Iraq lie at the door of Saddam Hussein's odious regime? What are the Government doing, with our allies, to spread better understanding of those facts?

Baroness Scotland of Asthal: My Lords, I respectfully agree with the noble Lord's comments. It appears that a propaganda campaign is being waged. We hope that it is not being waged successfully, because the issues are now becoming clear. The noble Lord is right in saying that the responsibility for the deprivation of the people of Iraq rests solely with Saddam Hussein. If any further evidence is required, one has only has to note that the regime has been using revenue from illegal oil sales, not to buy much-needed food and medicine but, for example, to purchase 300 million cigarettes and more than 38,000 bottles of whisky per month.

Baroness Williams of Crosby: My Lords, perhaps I may ask the Minister about what appears to be the serious unravelling of UN control over the financial input into Iraq. As I understand it, based on a report in today's Financial Times, there is now a much increased tendency for oil companies, including western oil companies, to pay a surcharge on their oil imports, which then goes directly back to the Saddam Hussein regime. In the light of that successful surcharge by Iraq, and in the light also of the growing willingness of other countries, including Syria, to take new oil imports from Iraq without much question, not under the oil-for-food programme but outside it, will Her Majesty's Government consider suggesting a reconvening of the Security Council to see whether a more effective regime over the control of oil exports could now be instituted?

Baroness Scotland of Asthal: My Lords, we appreciate the noble Baroness's expression of concern and anxiety in relation to this issue. It is important that the rules are applied and complied with. The Government will examine this issue. I shall write to the noble Baroness in due course if there is something further that we can do in this regard.

Lord Rea: My Lords, have the Government, either alone or through the Security Council, explored reports from Iraq that the Iraqi Government are willing to allow some form of weapons inspection back on to the soil of Iraq in return for the lifting of sanctions, which are now increasingly ineffective?

Baroness Scotland of Asthal: My Lords, first, I take issue with my noble friend when he says that sanctions are increasingly ineffective. The sanctions have had the effect of containing Saddam Hussein for 10 years. We should not underestimate the scale of that achievement. SCR 687 requires a completion of disarmament before sanctions are lifted. We cannot accept the lifting of sanctions before Iraq is in compliance with SCR 687. That would amount to rewarding Iraqi intransigence on its WMD capability. SCR 1284 offers a new way forward by agreeing the suspension of sanctions in return for co-operation with UNMOVIC and IAEA, including on key disarmament tasks. Again, no co-operation from Iraq has been noted as yet. We very much wish for that co-operation to take place.

Viscount Cranborne: My Lords, does the Minister agree that two of the most unhelpful nations in respect of encouraging the breaking of sanctions are Russia and France--both of which are members of the Security Council? To what extent does she think that the future health of the common foreign and security policy can be assumed if we find ourselves at odds with France, one of our principal European partners, in this respect?

Baroness Scotland of Asthal: My Lords, I cannot agree with the noble Viscount that we are at odds with our partner, France. In relation to an area as difficult, complex and sensitive as this, we must continue to strive for comity, clear understanding and joint action. To date, we have been successful in achieving that. It is an end to which we shall continue to strive with great energy and commitment.

Lord Howell of Guildford: My Lords, bearing in mind the perceptive remarks of my noble friend Lord Blaker about the rising success of Iraqi propaganda and the increasing tendency for the international community to ignore the sanctions policy, has not the time come for a much more robust approach? Is not Saddam Hussein--as the Minister recognised--the real cause of the holding back of medical supplies, the holding up of the repatriation of Kuwaiti personnel, re-arming his military, developing weapons of mass destruction and preparing greater freedom to attack his neighbours? Is it not time to be much rougher with those who argue for appeasement of this international monster before he becomes re-enthroned as a kind of hero on the international scene, and one that we should have difficulty in opposing?

Baroness Scotland of Asthal: My Lords, I understand the sentiment and thrust of the noble Lord's comments. However, I do not agree with him that we are not already being robust. We have a very robust approach. We have made very clear the criteria that must be satisfied before the Iraqis can have the sanctions lifted or suspended, and we wait for compliance. Unanimity on those issues is important, and we are encouraging all our partners to be as vigilant as we are.

Lord Avebury: My Lords, while recognising that Saddam Hussein may well have re-embarked on the manufacture of chemical and biological weapons, is there any evidence to indicate that nuclear weapons are on his agenda--bearing in mind that that would require either enrichment by gaseous diffusion or by centrifuge, and that these technologies are unlikely to be available to Saddam Hussein within his domestic resources?

Baroness Scotland of Asthal: My Lords, noble Lords would not expect me to answer in any detail in relation to these matters. We are keeping a vigilant eye on the development of such capacity in Iraq; and we shall remain vigilant for the foreseeable future.

Lord Chalfont: My Lords, does the Minister agree that even if Iraq cannot manufacture nuclear weapons, it is perfectly capable of importing them?

Baroness Scotland of Asthal: My Lords, we have sought to restrict the opportunities that would enable it to do that. The vigilance that I describe is attached to all imports into Iraq which would enable it either to develop that capacity or to gain access to such use.

Baroness Turner of Camden: My Lords, is the continued Anglo-American bombing of Iraq serving any useful purpose now?

Baroness Scotland of Asthal: My Lords, again I should like to make it clear so far as concerns bombing that those efforts are made in defence of our air crews, who are under attack and have been for the past two years. It is only in response to unjustified attacks made on us that we respond.

National Air Traffic Services

Lord Bradshaw: asked Her Majesty's Government:
	Whether the performance penalty regime proposed when the National Air Traffic Control Service becomes a public/private partnership is consistent with the undertakings given to the House that safety would be of paramount importance in the new arrangements.

Lord Macdonald of Tradeston: My Lords, there is no inconsistency between the proposed performance penalty regime for National Air Traffic Services Ltd and the Government's undertaking that safety will be of paramount importance. The delay term has been set at a level that is designed to give NATS an incentive to reduce delays without in any way undermining the primacy of safety as a factor in the operations of NATS.

Lord Bradshaw: My Lords, I thank the noble Lord for that reply. Does he recall a question that I asked when he made a Statement on the Hatfield rail disaster? I asked whether there was some inconsistency in the performance regimes and suggested that they might be perverse incentives. Will he please reconsider his answer? If air traffic controllers take into account the possibility of delays and penalties, their attention may not be fully fixed on their paramount duty of safety.

Lord Macdonald of Tradeston: My Lords, safety is of course the paramount consideration. Your Lordships ensured that that was the case by adding an amendment to the Transport Act 2000 during its passage through the House. The advice that the Government have received from the Civil Aviation Authority on the price regulation regime, including the delay term, had the approval of the authority's board, of which the director of safety regulation is a member. My department had a meeting with the director of safety regulation to ensure that he was satisfied that there would be no adverse implications for safety if the CAA's advice was adopted in full. In the event, the Government set a somewhat lower price cap and a somewhat lower maximum delay term for the NATS PPP in its early years than was recommended by the CAA.

Lord Clinton-Davis: My Lords, I hope that my noble friend recognises my interest in this matter, which is as a consultant with the British Airline Pilots Association. Does he also recognise that only the Airline Group has seen Members of this House? The other groups have so far refused to do so or have not replied to the request that we should be seen. Is my noble friend aware that the Airline Group is the only one of the three groups that operates on a non-profit-making basis? Is that not a good idea?

Lord Macdonald of Tradeston: My Lords, my department has encouraged all of the bidders in the NATS process to meet the trade union interest. I believe that those meetings have now been held. I hope that any request for further information will be responded to sympathetically. However, your Lordships will understand that we are currently in the middle of a bidding process and that it would not be appropriate for me to comment on individual bids.

Lord Brabazon of Tara: My Lords, during the three-month delay to the PPP, the Minister was, among other things, going to seek to persuade the controllers and employees of NATS of the merits of the Government's proposals. How successful have those efforts been, bearing in mind reports that I have seen in the press that the controllers are now threatening to strike?

Lord Macdonald of Tradeston: My Lords, my colleagues and I have visited West Drayton to see controllers and we have been to Swanwick. I have addressed meetings of managers at NATS and we have had meetings with trade unions. I have another meeting with the trade union leadership tomorrow. We have also seen pension trustees. We understand that it is natural for people to be concerned during a time of change. However, the Government have done much to meet legitimate staff concerns, and we remain open to dialogue. I shall take forward that dialogue when I meet the trade unions tomorrow. We are determined to secure a satisfactory outcome to the PPP and a strategic partner who will enhance and complement the operational excellence of NATS by bringing in new skills in the fields of project management, customer relations and financing.

Lord Hoyle: My Lords, could my noble friend say whether, in his view, there is any substance to the argument that is put forward by some NATS operators, who suggest that to give a bonus scheme to a supervisor could be the thin end of the wedge, in that it might undermine safety?

Lord Macdonald of Tradeston: My Lords, my understanding is that we already have contracts in place for senior managers, who are incentivised in terms of performance. During the years that those contracts have been in place, safety standards have not been adversely affected--in fact, they have improved. Safety remains the first and most important target for operational managers. The very small number of contracts that were on offer and that continued to have a very small percentage of incentive would not be detrimental to the very high safety standards that are set.

Lord Elton: My Lords, who will lose their bonus if there is a near miss?

Lord Macdonald of Tradeston: My Lords, the way in which those bonuses are structured ensures that no individual flight is ever taken into account when assessing any kind of incentive. Rather, a general incentive over general performance right across the en route sector is involved.

Viscount Brookeborough: My Lords, is the Minister aware that not all delays are necessarily caused or can be rectified by air traffic controllers? Other causes include the military use of airspace, bad weather and handling on the airfield at an airport. Are penalties envisaged in that context?

Lord Macdonald of Tradeston: My Lords, the measure of delay that we have introduced is, as I said earlier, less than that recommended to us to ensure a smooth transition to the new regime. It does not include delays due to air traffic control at airports or to flow management problems that are attributed to other en route service providers. Moreover, it does not have any effect on consequential delays that are caused to subsequent flights as a result of knock-on effects. We will also exclude the impact of extreme weather, which removes a potential conflict between safety and financial penalties. That keeps safety paramount, as we have always intended.

Business of the House: EU Debate, 7th February

Lord Bruce of Donington: My Lords, I trust that the House will forgive me if I draw its attention to some administrative difficulties--I put it no more strongly than that--which arise in relation to tomorrow's business. I refer to the Motion in the name of my noble friend Lord Tomlinson. The Motion calls
	"attention to the Nice Treaty and the case for European Union enlargement"
	and it moves for Papers. As is customary when participating in such debates, one finds it necessary to refer, often in detail, to the documents that are mentioned. In this case, we need to examine the Treaty of Nice. Regrettably, I have to inform the House that until the time at which I came into the Chamber this afternoon, an up-to-date copy of the Treaty of Nice had not come into the possession of Members of this House or of the Library. However, I am given to understand that a copy was delivered to the House of Commons Library.

Noble Lords: Oh!

Lord Bruce of Donington: My Lords, that places in a difficult position those of us who take seriously events in the European Community. Documents should be readily available and provided in time for one to be able to participate in a debate on them. The latest copy of the Treaty of Nice that I have is dated 12th December. Its reference number is 533/00, and it is 197 pages long. I assure your Lordships that it is not free from ambiguity. I suspect that your Lordships will agree that that characteristic is fairly often typical of some emanations from the European Commission and other European bodies.
	I gave notice to my noble friend Lord Tomlinson of the situation. I have the document dated 12th December before me. However, although a later edition was published on 22nd December, we have been unable to see it. Before participating in tomorrow's debate--if indeed I do--I would like to be familiar with the treaty to which I may refer.
	Past experience has shown that when the Commission amends documents which are dubious to begin with--such documents are numerous--the ambiguities often appear in a more general and sometimes more obtuse form in the revised version. I should be glad to have the guidance of the House as to whether, in the circumstances, we wish to proceed with the debate. I warn noble Lords that I believe that, if they study the Treaty of Nice in its revised form, it will take well over a day simply to read it. I shall be glad to receive guidance on the matter, and I am sorry that I have had to raise it.

Baroness Scotland of Asthal: My Lords, I hope that I can reassure my noble friend and the House that his dilemma will be resolved quickly. I am sorry that the other place appears to have received a benefit not given to this House. However, the final version of the Nice Treaty, to be signed in Nice on 26th February, will be sent to the House Library this afternoon. Earlier versions have been available to the Library of the House and remain so. I cannot assist your Lordships as to whether the copy currently placed in the Library of the other place is the final or the earlier version. However, I can assure noble Lords that the final version will be available.

Lord Pearson of Rannoch: My Lords, can the Minister advise us whether photocopying facilities will be made available in sufficient quantity to allow those of us--I know that this applies to several noble Lords--who wish to peruse this lengthy document before tomorrow afternoon to do so?

Baroness Scotland of Asthal: My Lords, I am confident that arrangements can be made. I am sure that the experience of all Members of the House is that the Library is increasingly energetic in providing assistance.

Lord Pilkington of Oxenford: My Lords, can the Minister account for the delay? The document will be produced only a short time before the debate.

Baroness Scotland of Asthal: My Lords, the treaty is to be signed on 26th February. I know that the debate is to take place tomorrow, but the appropriate date is 26th February. I can assure your Lordships that the final version was made available as swiftly as was reasonably practicable.

Baroness Whitaker: My Lords, can my noble friend confirm that the Nice Treaty is easily available to anyone who wishes to download it from the Internet?

Baroness Scotland of Asthal: My Lords, that is certainly the case. However, I know that Members of this House like to have documentation in their hands, and not all noble Lords are as conversant with the Internet as they would like to be. Therefore, I can reassure the House that this document can now be delivered through many vehicles.

Baroness Knight of Collingtree: My Lords, in the circumstances outlined by the Minister, would it not have been possible to delay a little before holding the debate?

Baroness Scotland of Asthal: My Lords, that is certainly not a matter for me. However, I emphasise that earlier versions of the treaty have been made available in the Library of the House. I hope that those versions have been of some little use to Members who have wished to look at them.

Lord Stoddart of Swindon: My Lords, can my noble friend say whether the Government intend to publish a White Paper on this complicated treaty and whether, at a later stage, they will hold a further debate in government time?

Baroness Scotland of Asthal: My Lords, I am sure that those matters will be addressed through the usual channels.

Lord Strathclyde: My Lords, is not the last point that was raised one of the best to have been made this afternoon? Only recently, the House asserted its right to hold debates on Wednesday afternoons, and I commend the Labour Party for having chosen this subject. However, the debate is to be held during the second part of the day and it will be limited probably only to two-and-a-half hours. Should there not have been a proper, full day's debate in government time starting immediately after Question Time? Can the Government give a rather stronger assurance on that point? We on this side of the usual channels would very much welcome a proper debate on the White Paper when it is published.

Baroness Scotland of Asthal: My Lords, I know that noble Lords opposite always get a ready ear from these Benches. I am sure that in their usual amicable way the usual channels will be able to sort out this minor difficulty.

Lord Elton: My Lords, can the noble Baroness reassure us that the occasion tomorrow will not be the one on which we were told that we, as Parliament, would be able to scrutinise the treaty before it was brought into force? Can she reassure us that a full debate will be held in government time before it is brought into force?

Baroness Scotland of Asthal: My Lords, there will of course be a Bill. I am confident that, during the process of that Bill through both Houses, there will be active and vigorous, if not contentious, debate.

International Criminal Court Bill [H.L.]

Baroness Scotland of Asthal: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, That it be an instruction to the Committee of the Whole House to whom the International Criminal Court Bill [H.L.] has been committed that they consider the Bill in the following order:
	Clauses 1 to 24, Schedule 2, Clauses 25 to 28, Schedule 3, Clauses 29 to 34, Schedule 4, Clauses 35 to 37, Schedule 5, Clause 38, Schedule 6, Clauses 39 to 42, Schedule 7, Clauses 43 to 50, Schedule 8, Clauses 51 to 54, Schedule 9, Clauses 55 to 82, Schedule 10, Schedule 1.--(Baroness Scotland of Asthal.)

On Question, Motion agreed to.

Social Security Fraud Bill [H.L.]

Baroness Hollis of Heigham: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
	Moved, That the House do now again resolve itself into Committee.--(Baroness Hollis of Heigham.)

On Question, Motion agreed to.
	House in Committee accordingly.
	[The CHAIRMAN OF COMMITTEES in the Chair.]
	Clause 2 [Electronic access to information]:

Lord Astor of Hever: moved Amendment No. 46:
	Page 4, line 43, leave out from ("may") to end of line 45 and insert ("enter into arrangements with that person under which authorised officers may obtain by electronic access to those records the information which they could have requested by a notice issued in accordance with section 109B(1)").

Lord Astor of Hever: In moving Amendment No. 46, I wish to speak also to Amendments Nos. 52, 54, 57 and 59. The first four are probing amendments to clarify whether the DSS and local authorities should have an ability to require organisations to enter into arrangements for electronic access. The BBA in particular is concerned at the conditions for the exercise of the power of the Secretary of State or local authorities to require electronic access.
	In the proposed Section 109BA the power can be exercised where it appears to the Secretary of State,
	"(c) that facilities exist under which electronic access ... is being provided, or is capable of being provided, by that person to other persons".
	We believe that it is reasonable to assume that a bank which maintains its records on a computer system will have in place facilities which allow appropriate members of its staff to locate and retrieve details of its customers' accounts via electronic access. It is difficult to imagine that technically those facilities could not be made available to third parties. Therefore, this clause would allow the DSS to require any bank to make electronic access available to it and, under proposed Section 109BA(3), to specify exactly what must be made available.
	We understand that this section is intended to relate particularly to credit reference agencies, where it may be simpler and cheaper to provide electronic access than to process numerous inquiries on paper. Although we recognise the desire not to make powers in Acts too specific, in this case the net appears to have been thrown far too wide.
	Amendment No. 59--also a probing amendment--inserts a defence of reasonable excuse into the offence provision under Clause 2. There may be a number of valid reasons why a person cannot comply with a requirement under Sections 109BA or 110AA. As currently drafted, the Bill takes no account of that and creates an offence of strict liability, regardless of the circumstances of the particular case. We are of the view that every case should be considered on its own merits and that only wilful refusal to comply with a requirement under the Bill should be culpable. I beg to move.

Baroness Hollis of Heigham: I should like to speak to Amendment No. 46 and the other amendments in the group.
	Electronic access to information is an extremely important aspect of the fight against fraud. Credit reference agencies and telecoms providers both have facilities for people to go online in order to obtain information. This is a quicker and cheaper process for their customers, and is a valued service, particularly in the financial industry.
	The amendments would not prevent authorised officers accessing information electronically. Equally, they would not prevent the Secretary of State entering into the arrangements that would be required to ensure such access. Nevertheless, they could be damaging amendments.
	Amendments Nos. 46 and 52 seek to allow the Secretary of State to enter into arrangements for electronic access with organisations on a voluntary basis, rather than giving him the power to require them to enter into such arrangements. We have been informed by one service provider that it would charge £1 per inquiry made electronically, as compared to £10 for each inquiry made to it in writing.
	If a business did not want to help the DSS to fight fraud, which is unlikely but possible, that difference in price could put it in a prime position to thwart our efforts, and the DSS would have to spend millions, not thousands.
	By drafting the clause in this way, by providing for a power to require organisations to enter into arrangements, we have sought to ensure that the Government can obtain a fair deal. The payment provisions in Clause 3 and the safeguards that I am about to mention will ensure that this deal is not obtained at the expense of fairness to the private sector: it is a precautionary provision, which we think achieves a balance between the needs of the various parties involved.
	We appreciate that businesses are concerned about the security of their information and wish to screen who has access to that information. Consequently, a power to require them to enter into arrangements may leave them feeling insecure, and I understand the point made by the noble Lord, Lord Astor. However, I can assure noble Lords that we would put in place strong safeguards against abuse. Access to databases would be allowed only to specifically authorised officers. These would be of at least executive officer grade, and would be centrally located within each of our administrative areas. They would be managed by a more senior officer, and would be and highly trained through our Professionalism in Security programme. Access to databases would be controlled by passwords. We would also obtain a record of all inquiries made on the database, which could be cross-checked against our own records. Any discrepancies suggesting improprieties could be spotted and thoroughly investigated. I also refer noble Lords to the Computer Misuse Act 1990, under which officers who break into databases can be imprisoned.
	We shall do all that we can to ensure that the information we obtain under these measures is lawfully obtained. Our safeguards will be such that, if authorised officers misuse their powers to access databases, they will be both caught and punished, and they will know it.
	Amendments Nos. 54 and 57 cover the same issues as Amendments Nos. 46 and 52, but in relation to local authorities. Everything that I have said thus far applies also to these amendments. Local authorities also need this provision. However, they have to go one step further and go through the process of obtaining the Secretary of State's consent before they can use these powers.
	We considered very carefully whether local authorities should be required to obtain consent before entering into arrangements for electronic access. On balance, however, we decided that it was desirable. We should ensure that local authorities are able properly to use this provision to obtain almost instantaneous responses to their inquiries. As we have repeated ad infinitum, housing benefit, which is administered by local authorities on our behalf, is one of the areas most susceptible to fraud.
	The Secretary of State will need to consider whether those local authorities are willing, and able, to implement safeguards and audit trails that would deter and identify abuses of electronic access. He will need to consider their overall management controls, whether they have been subject to complaints before, whether they have had an adverse benefit fraud inspectorate report-in short, whether they are running a tight ship, and one that the DSS thinks will be properly handled.
	These issues are, of course, relevant to all the inquiries that would be allowed under these provisions. However, given the instant access to information through electronic access, we thought it best to build in the additional safeguard of scrutiny by the Secretary of State, before a local authority is permitted to use such powers.
	Noble Lords need not worry that local authorities will have to pay more for inquiries until they have achieved consent because the DSS will use its electronic access facilities to process inquiries on behalf of local authorities, until such time as they can do so themselves.
	Turning to Amendment No. 59, I can assure noble Lords that the Secretary of State is under a duty to take into account any reasonable excuse that an organisation may have for not providing electronic access to information. The Secretary of State and local authorities are always under a duty to act reasonably wherever they have a power of discretion. This is a well established principle of administrative law, and would apply to this provision. If the Secretary of State or a local authority failed to act reasonably, their actions would be subject to judicial review, and if that review were successful, the decision would be set aside. I appreciate, however, that there may be practical concerns about whether we would act reasonably and take into account reasonable excuse.
	We already have powers to obtain information from employers. They sometimes have a reasonable excuse for not complying with our requests for information; for instance, if their payroll system has crashed. Authorised officers are already used to distinguishing such "reasonable excuses" and coming to sensible arrangements to work around the problem.
	Concern has been expressed that the relating to an organisation's capability to provide electronic access could be used, for example, to force an organisation to provide us with electronic access to bank details simply because its customers can access their own bank accounts over the Internet. It may be helpful if I explain how these provisions will work in practice as this is the first of the amendments in Clause 2, and it may prevent us having to go over the same ground later.
	The Bill allows us to require electronic access in only two circumstances: first, where such access is already available to another organisation, as is the case with the credit reference agencies; and secondly, where the capacity exists to provide such access to another organisation. In the second case, I stress that the capacity must already exist.
	It is not open to the Secretary of State to demand that new computer software or hardware be obtained to facilitate electronic access to an organisation's records. The power is aimed at circumstances where a business is planning to provide access to a third party but is unwilling to give it to the DSS. In such cases, the Secretary of State could require that he, too, should have electronic access. There is no intention--and I doubt whether the Bill would permit it--for the Secretary of State to require electronic access to a company's records apart from in the circumstances that I have mentioned.
	For the avoidance of doubt, I am happy to put on the record and to assure noble Lords that the Secretary of State will not require any business to provide electronic access to its records unless it is already doing so, or plans to do so for another organisation.
	I hope that I have given the noble Lord the reassurances that he perfectly properly sought, and that against that background he is able to withdraw the amendment.

Lord Astor of Hever: I am grateful to the Minister for that very full answer and the assurances she has given. The Minister stated that the first four amendments were damaging amendments. I had pointed out that they are only probing amendments. The Minister also stated that some business might not want to help the DSS to fight fraud. I have not spoken to a single business that has taken that position. I was grateful for the reassurance about the strong safeguards that the Government intend to introduce against abuse of electronic access. In regard to Amendment No. 59, I am also grateful for her reassurance as to reasonable excuse for not complying.
	A great deal of detail has been given, and I shall read Hansard carefully. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 47 to 50 not moved.]

Lord Higgins: moved Amendment No. 51:
	Page 5, line 10, leave out ("could") insert ("should").

Lord Higgins: Earlier in our deliberations on Clause 1 we made it clear that we were strongly in favour of information being provided to the Government to enable them to deal with the problem of fraud. However, considerable doubts were expressed earlier about the side effects of the proposals. We were very pleased to hear the assurances of the Minister. The first was that the decision on whether there should be an inquiry should not turn simply on whether it was likely to be a case of fraud. The Minister has undertaken to introduce amendments on Report to cover that point. Similarly, on the doubts expressed in relation to the suspicion that members of a group may be involved, she again gave an undertaking, although that fact did not seem to catch up with last weekend's Sunday Telegraph.
	This amendment takes the same approach. In exercising the fairly draconian powers that are provided for in the Bill, we are concerned that in each case there should be a reasonable suspicion that a particular individual has taken action that may be regarded as fraudulent.
	In Section 2, which is concerned with electronic information, it appears that in subsection (2) the Government seek to reassure us. It says:
	"An authorised officer--
	(a) shall be entitled to obtain information in accordance with arrangements ... only if his authorisation states that his authorisation applies for the purposes of that subsection".
	We are more doubtful about subsection (2)(b) which states that the authorised officer:
	"shall not seek to obtain any information in accordance with any such arrangements other than information which relates to a particular person"--
	and this is the crunch of the matter--
	"and could be the subject of a requirement under section 109B above".
	We are concerned that what appears to be a protection for the individual may turn out not to be protection because an authorised officer has to show only that the person he is investigating could be the subject of an inquiry. That is closely related to the debate that we had on whether it is likely or not. We believe that he should be entitled to obtain the information by electronic means only if he has a reasonable suspicion. We believe that there would be better protection for the individual and for the prevention of fishing trips--in this case by electronic means--if the amendment were agreed to. I beg to move.

Baroness Hollis of Heigham: I have great affection for amendments like this. I used to table such amendments, no doubt to the entertainment and education of the Chairman of Committees.
	Amendment No. 51 seeks to change the wording in new Section 109BA(2)(b). This particular subsection ensures that authorised officers make electronic inquiries only of people who could be the subject of a requirement under Section 109B. The amendment, as the noble Lord explained carefully, seeks to substitute the word "could" for "should". Technically, I believe that the amendment is meaningless, but that has never stopped us in the past, so it should not stop us now.
	Perhaps I can deal with the substantive point. I hope I can dispel the concerns of the noble Lord that may have prompted the amendment. The people about whom we may seek information are defined in Clause 1 (new Section 109B(2B) and (2C). The provision as currently drafted means that we would be able to obtain information by electronic means only about people who fall within those provisions. Consequently, your Lordships should have no fears that the scope of electronic access to information is any wider than the power to obtain information in writing. Therefore, in the light of that explanation, which I believe it is useful to put into Hansard, I hope that the noble Lord will withdraw the amendment.

Lord Higgins: I am grateful to the Minister for that reply. As she points out, it is a classic form of words and not infrequently such classic forms of words convey the concerns that the Opposition have without necessarily wanting to see them incorporated in the Bill. We still have some concern about this matter which reflects a theme that runs throughout the Bill. In the light of the explanation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 52 not moved.]

Lord Higgins: moved Amendment No. 53:
	Page 5, line 24, at end insert ("; and
	(e) such arrangements as are necessary to provide the person with a report upon the investigation should they either be incidental to the investigation in process or, if the subject of that investigation, found to be innocent of any wrongdoing").

Lord Higgins: In moving Amendment No. 53, I shall speak also to Amendment No. 64. Amendment No. 53 suggests at line 24 on page 5 that we should insert a further provision. Subsection (3) refers to:
	"The matters that may be included in the arrangements that a person is required to enter into under subsection (1)"--
	regarding electronic provision and so on. We take the view that the amendment would provide an appropriate additional protection.
	Amendment No. 64 concerns a different point. With regard to data held by credit rating agencies, it is well known that an individual may obtain the details that are held by an agency either generally or, more particularly, electronically. I believe that that is an important protection. In that instance we would have a series of investigations of which, apparently, the individual would not be aware. We believe that there is a case for saying that that information should be disclosed so that, if necessary, individuals can obtain redress or take corrective action in the same way that they could do so if they found that a credit rating agency held inaccurate information on its records.
	We are concerned that the overall provisions of the Bill will result in a large number--20,000 or whatever--of investigations. We feel that an individual should know whether such an investigation has taken place and what information is being held by the Government, having collected information from a whole range of different sources that may affect an individual's position with regard to credit rating and so on. I beg to move.

Baroness Hollis of Heigham: Amendment No. 53 would impose a duty on authorised officers to prepare a report of an investigation for those on whom information was obtained, where they were incidental to the investigation or found innocent. The effect of the amendment as drafted would be to issue the report of the investigation to the information provider, not to the subject of the inquiry. I am sure that that was not the intention of the noble Lord. Nevertheless, that would be the effect, which would be wholly contrary to the Data Protection Act--I believe the word "person" gives rise to that. It would also compromise the investigation and be unfair to the subject. That, of course, could be repaired by redrafting.
	More substantively, I believe that the amendment is unnecessary. I shall explain why. First, we shall ensure that those claiming benefit know that they may be the subject of the powers of investigation. Benefit claim forms will make it clear to claimants that the information that they provide may be checked with third parties. Moreover, we shall not use the powers before we have published a code of practice that will be available to anyone who wants to know more about our ability to obtain information.
	Secondly, the Data Protection Act provides further safeguards. Any individual is free at any time to ask an organisation what data it holds on him. That includes the DSS, as we said previously in Committee. Provided that the information requested would not jeopardise an investigation, the department must provide it. The DSS receives about 2,500 requests for such information each year.
	I discussed with officials what an individual may receive from the DSS if he or she sought such information. Let us take the example of an individual who is now 30 but who has been at an FE college, has had a year on housing benefit and JSA while retaking, on a part-time basis, one A-level, has gone to university and after leaving university has been on JSA for three or four months before going into a full-time job. I suspect that that simple example will be redolent of the nephews, nieces, sons or daughters of noble Lords. If that individual asked the DSS what information it held on them, they would get back a print-out of information about their JSA payment, including details of their income, the dates on which they moved on to and off benefit, any refusals to do appropriate work while on JSA, and, above all, information about their NICs, which is often the reason why people inquire whether they are building a full retirement pension. However, we would not have information on their housing benefit, their labour market details or their current financial status. They would therefore receive a print-out ranging from a few to a large number of sheets, depending how many years of NICs records they had, which is the largest constituent element.
	That information, which is available now, is sought by approximately 2,500 people per year. Under the Data Protection Act, that information will continue to be provided with reasonably expeditious speed to anybody who seeks it. Anybody can check the information and correct it if necessary. It would be unprecedented to go beyond those safeguards in law enforcement in this country. I believe that those safeguards are sufficient to protect the individual against unwarranted intrusion.
	Amendment No. 64 requires the Secretary of State to make arrangements for the disclosure of information according to certain standards, which are to be drawn up, and for those standards to form part of a code of practice. It requires the disclosure of information, which is unspecified, to persons incidental to the inquiry and to persons who are found not to have committed an offence. It also requires an official to monitor the application of those standards and to report.
	The amendment is redundant. That is because the procedures and standards to be adhered to for the disclosure of information and for the prevention of unauthorised disclosure are already enshrined in law and in existing guidance to staff. This amendment adds nothing to the existing safeguards.
	The law already provides strong safeguards against a person unlawfully obtaining or disclosing information. Those have already been mentioned. Our Protection of Customer Information Guide, which is publicly available, sets out in detail the rules governing the disclosure of personal information. A revised version was published in April 2000. We are currently considering the production of an information guide dealing specifically with the right of DSS customers to access personal information kept about them. I hope that that will be available by the autumn.
	I hope that I have met the noble Lord's concerns. Nothing in this Bill overrides the provisions of the Data Protection Act. The use of information obtained under these powers would be controlled strictly in accordance with the principles of that Act. We cannot do otherwise. Further, all investigations would be carried out according to the procedures laid down in the Police and Criminal Evidence Act 1984 and the Criminal Procedure and Investigations Act 1996, and their statutory codes of practice. The Criminal Procedure and Investigations Act code of practice sets out procedures for the retention and disclosure of information in criminal cases.
	Anybody can seek access to the information held, providing that it does not jeopardise, or is not prejudicial to, a fraud investigation. In addition, the standards involved in this and other areas of fraud investigation will be overseen by an official. In those circumstances, I hope that the noble Lord will agree that we have in place a very full set of safeguards. I welcome the opportunity to place them on the record. In the light of those assurances, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Higgins: We are grateful to the noble Baroness for her full reply. Her statement that nothing in the Bill contravenes the Data Protection Act may be true. However, the Data Protection Commissioner does not take the view that nothing in the Bill gives her cause for considerable concern. That is one of the reasons we are particularly anxious to clarify a number of points.
	I should like, with the help of the Minister, to clarify a particular point. She has said that if an investigation is carried out under this Bill, the department will be in possession of a mass of information about the subject of the inquiry. Information obtained from banks, credit rating agencies, water companies and telephone companies will presumably be kept on file simply on the basis of a suspicion that an individual may have engaged in fraudulent activities. It is not clear to me why an individual should realise that and, therefore, ask to see information that was not previously held--information which, in the event, would not be needed because the department had concluded that no fraud had been committed.
	First, I am not clear why, in such a case, the department would need to continue to hold all that information. Secondly, I do not understand how individuals will know that they are suspected and that that information had been collected. They may feel that it should not, for example, be left to float around the local office of a local authority whose staff may know, or may even be the next-door neighbour of, the individual concerned. Perhaps the Minister will also tell us whether the information collected will be held indefinitely by the local authority or whether it will be removed from the record.

Baroness Hollis of Heigham: My understanding is that information will not, to use the noble Lord's words, float around. I have emphasised that only a very limited number of properly trained officials will be accountable to a professional fraud supervising officer. That, together with the back up of the provisions of the Computer Misuse Act and the Data Protection Act, should prevent such floating around of information. I know that the noble Lord used the expression in a colloquial way. I can assure him that if that happened, we should have failed in our safeguards. It is very important that we should not do so. The information will be very tightly controlled, as will access to it. If it transpires that somebody may be making improper use of information concerning, for example, a former partner, we shall be able to catch that person, who will have no future with either the local authority or the DSS. If I have misled the noble Lord on that point, I shall certainly return to it.
	Secondly, the noble Lord asked how long the information would be held. I have answered that question in Committee previously. We expect the records to be held for about 18 months and then to be destroyed. In the event of an ongoing inquiry, they could be held for a longer period.
	Thirdly, these investigations will not arise out of the blue. Reference has been made to innocent people not knowing of the existence of a fraud inquiry. To some extent, such investigations have to be secretive, by reason of the fact that we are dealing with the heavy end of fraud here--sophisticated people who might, if they suspected they were being investigated by the DSS, rearrange their financial affairs, their bank accounts and the like. In the case of a genuinely innocent person who may have made an error, the first response from the DSS would be to try to understand any discrepancy of information. We are not seeking to prosecute people, but we will prosecute in cases that involve a deliberate intent to defraud, where we have acquired that information on reasonable grounds.
	I therefore doubt that there will be many cases of innocent people having reasonable grounds for being upset that information is being held about them. That is not how it will work. Errors will be sorted out locally. If it is discovered that benefit has inappropriately been claimed, that benefit may be stopped. We are after people who deliberately twice--certainly once--defraud the system. We are not referring to innocent people but to people about whom there is a reasonable suspicion, who are likely to share information. It is true that they will not necessarily know what information the DSS has collected on them.
	Our code of practice and the measures that I have outlined for individuals to access information that is held mean that individuals could access that information in the 18 months after an investigation has been brought to an end and before the papers are destroyed. That additional precaution is in place, if somebody has reason to believe that the DSS has inquired about them and wants to check that there is no inappropriate information. That, too, would be a safeguard.
	I hope that I have dealt with the noble Lord's points: first, that the information will not float around; secondly, that it is unlikely to target innocent persons and take them by surprise, because we are dealing with the heavy end of fraud, although I admit that it could sometimes happen; and, thirdly, that if somebody is found to be innocent or information is not required for an ongoing fraud investigation, it would be destroyed after 18 months. My understanding is that that would also apply to local authorities. If I have any further information on those points, I shall write to the noble Lord, but that is my understanding.

Lord Higgins: I am grateful to the Minister. We are concerned about these matters for the reasons that we expressed in Amendment No. 1 to Clause 1; namely, that the department will carry out these investigations without any outside authority from, for example, a magistrate. We have previously debated that point at length. In the absence of amendments which have not yet been made to the Bill, one must be concerned that the provision may result in a considerable intrusion into the privacy of innocent people.
	I want to be clear about one matter which the Minister mentioned and then I shall seek to withdraw the amendment. She said that this is at the "heavy end" of the market. That is true as regards organised fraud, the collusion of employers and so forth, but I understand that the information will be collected even if a comparatively minor case is being investigated. Therefore, I am not clear about the definition of "heavy end" in this context.

Baroness Hollis of Heigham: I was trying to draw a distinction. Let us take disability benefits as an example. When we check on claims for, say, disability living allowance, between 15 and 20 per cent are found to be inappropriate. However, in very few cases is there fraud. People get better, there is a change of circumstance and they do not report back to us. In those cases, we do not go after them in order to prosecute because there has been an error which has been sorted. It has been established that the eligibility for benefit does not exist and benefit has been withdrawn.
	Here we are talking about the heavy end of fraud. We are talking about people who have knowingly and deliberately produced false information in order to establish a claim to a benefit to which they are not entitled. That is what I mean by "heavy end" as opposed to a case which is in the grey area between error and fraud; for instance, someone recovering but none the less continuing to draw disability benefit. I cannot recall many cases in which we have prosecuted someone in receipt of DLA. A prosecution would arise in a case where, for example, a claimant had impersonated someone. That would be deliberate and knowing and what I would describe as the "heavy end" of fraud. That is the distinction I was seeking to draw.

Baroness Noakes: The Minister spoke of prosecution but the powers relate to obtaining information. We are discussing safeguards around the use of the powers to gain information. She spoke as though such cases were black and white but I am not sure that they are. We should consider cases, for example, dealt with by the adjudicator in relation to the Customs and Excise.
	It will be found that often junior officials see cases in black and white, but they are not. Supervisory procedures fall down and it is not always the case that officials, however, well trained and even if authorised, will reach the right decision. That is why my noble friend is looking for safeguards.
	I understand that the Government are trying to catch the villains but in practice the proposals are likely to affect those who are not villains. For that reason, we are looking for safeguards against abuse--admittedly inadvertent abuse--of the provisions.

Lord Higgins: It may be less disorderly if I speak now and then the Minister can reply further. I am somewhat puzzled by the whole business. The Minister said that the provisions will be concerned only with the heavy end of the market, but she now appears to be saying that no investigations under the Bill--the demands for information and so forth--will be carried out in cases where, for example, someone simply forgot to tell the department about a change of circumstance. I understood that the provisions would deal with the "lighter end" of the market; that information would be collected on cases in that category, and that it would be held by the department.
	If the Minister is saying that the provisions are concerned only with serious cases, that puts a totally different complexion on the Bill and on the likelihood of achieving the savings which the Government hope to make.

Baroness Hollis of Heigham: We are making a false distinction between the "soft" and "heavy" end of fraud. The information is being collected where there is reasonable ground under Clause 1(2C). Paragraph (a), which is subject to later amendments, relates to,
	"a person who has contravened, is contravening or is likely to contravene provisions of the relevant social security legislation",
	and is what I would call the "error" territory. Paragraph (b) relates to,
	"a person who has committed, is committing or is likely to commit a benefit offence",
	and is the "fraud" territory.
	In terms of the heavy end of fraud, we shall collect information. If a person is, so to speak, innocent or if the case is easily resolved because there was an error, the information will be scrapped within 18 months. The same rule applies to local authorities. It is likely that the information will be held longer only when someone is likely to commit a benefit offence and there is an ongoing inquiry which might lead to a prosecution. That was the point I was making.
	As the noble Lord knows, we would always go to the claimant in the first place for an explanation of the discrepancies which have given rise to the "reasonable grounds" under Clause 1(2C)(a) and (b). The powers would be used only where fraud was suspected. That is what I meant by "heavy" as opposed to "error". The noble Baroness, Lady Noakes, was right in saying that cases are not clear-cut and that the area is shaded. If someone has had, say, a kidney transplant and continues to claim DLA because he or she needs constant attention as a result of dialysis, the line may be crossed.
	However, I do not believe that there is an issue to be resolved and I am not sure why the noble Lord continues to press me. Clearly, we need to collect the information either in terms of a contravention of the legislation, which is likely to be an error, or a potential offence, which is likely to be fraud. We would normally go to the person concerned and, under paragraph (a), if that person can clear up our concerns, no problem will persist. However, if the case falls under paragraph (b), we will go on to collect further information. At that point, we may seek access to information which will validate what the claimant has told us because we do not believe it to be true. That is what I meant by the "heavy end"; someone deliberately misleading the DSS and the benefits system. We would seek information from third parties and so forth because we had well founded reasonable beliefs.

Lord Higgins: We shall need to read carefully what the noble Baroness said, in particular what appears to be a clear statement of government policy; namely, that they will collect the information only if, at the lighter end of the market, they have already asked the claimant whether he has made a mistake--

Baroness Hollis of Heigham: We would not invariably ask the claimant. I am saying only that in normal circumstances the claimant would be the first port of call for an explanation of why the discrepancies appeared to exist.
	I am thinking on my feet, but one can imagine a transnational case in which the last thing one wants to do is to tip people off that inquiries are being made. I would not want that statement to be seen as an absolute statement.

Lord Higgins: In the light of that reply, which we shall study carefully, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 54 and 55 not moved.]

Lord Astor of Hever: moved Amendment No. 56:
	Page 6, line 7, leave out from ("person") to end of line 11.

Lord Astor of Hever: Standards of scrutiny and conduct in matters relating to confidential data are, to say the least, variable in some local authorities. While most local authorities pursue their responsibilities diligently, this probing amendment is an opportunity to highlight the lack of safeguards and to seek reassurance from the Minister.
	Disclosure of investigation could lead to physical threats against both elected councillors and council staff. The public have justifiable fears that the powers granted in the Bill could be open to abuse. Looking at some inner-city authorities, whether Hackney or Doncaster, one sees sufficient instances of malpractice and fraud by both elected members and officers to make it evident that safeguards need to be in place. As the Data Protection Commissioner made clear, the volume of information and the quality of some local authorities' safeguards mean that abuse is likely. Until we have a code of practice and know what is in it, a member of the public who felt that a local authority had abused the powers that had been given to it in this Bill would have little recourse save through the ombudsman. That can be a lengthy and unsatisfactory process. I beg to move.

Baroness Hollis of Heigham: The Government are very clear as regards this amendment and the circumstances in which we would wish authorised officers to make inquiries of the organisations listed. They may be made only when an authorised officer has reasonable grounds for believing that a person is or may be committing fraud. We have gone over some of this territory before. Inquiries may be made only about particular persons. That is set out in the new Sections 109B(2B) and (2C), in the Bill. The provision which this amendment seeks to remove ensures that when they are making electronic inquiries, authorised officers are limited in the way I have just described. Our policy intention, which will be achieved by this Bill, is that an officer should not be able to make any inquiry electronically that he could not make in writing. In other words, the protection in Clause 1 has a halo effect on Clause 2.
	By removing lines 8 to 11, the amendment widens local authority powers in ways which I am sure the noble Lord, Lord Astor, did not intend. Section 109B contains the provisions which limit authorised officers to make inquiries only where they have reasonable grounds. By removing those lines, the link to Section 109B would be removed and, dare I say it, local authority staff would be able to pick names at random. I am sure that the Committee would not wish that to happen.
	More generally, the protections I have already suggested remain. Benefit claimants will know that their information can be checked with third parties and that they are under a duty to tell the truth. If, knowing that, they lie, we have the right and the ability to check their information.
	As regards local authorities requiring the consent of the Secretary of State before obtaining electronic access to records, I have already explained that it is our intention that they will not go online until the Secretary of State is satisfied that the necessary safeguards are in place. Again, only some local authorities will have that power and that is where we are confident that they have properly trained and professional officers in place who are subject to these codes. I am certain that the noble Lord has no wish to see unfettered access to electronic information either for local authority or DSS investigators, which is what this amendment would achieve. I suggest that the noble Lord may wish to withdraw his amendment.

Lord Astor of Hever: The noble Baroness is correct. I said that this was only a probing amendment and that we were seeking reassurances from the Minister. She has given those reassurances and the clarifications that we sought. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 57 to 59 not moved.]
	On Question, Whether Clause 2 shall stand part of the Bill?

Lord Astor of Hever: The e-envoy, Alex Allen, is preparing a White Paper which will oversee a whole range of confidential and other relevant issues that may question or impact on Clause 2. The Data Protection Commissioner cited the work of the e-envoy and suggested that rushed legislation in this or any other area would be bad legislation. That was demonstrated by the destruction and withdrawal of the first version of last year's e-commerce Bill. The Question whether Clause 2 should stand part of the Bill gives the Minister the opportunity to explain why the Government believe it wise to pre-empt the envoy's findings. Have the Government synchronised the proposals of this Bill with the work programme of the e-envoy?
	Liberty believes that the powers conferred by this clause will be open to both intentional and unintentional abuse. The risk of intentional abuse is clear. Although the Bill gives the Secretary of State or a local authority the power to require the person or body giving electronically accessed information to record the use made of the facility, it is not an absolute requirement. Even if the requirement is imposed, presumably the records are likely to be scrutinised only by the investigators themselves or by the people working for the same organisation, if it happens at all. Given that considerable use is likely to be made of that facility, it would be very easy for an investigator wanting, for a reason of his own, to seek information about someone to access information without being found out.
	The risk of unintentional abuse stems from the fear that more information is likely to be accessed by electronic means than where a written request is made. The right to acquire information proposed in the Bill will be subject to requirements in the existing Section 109B(1) that an investigator should request only such information as he or she reasonably needs. An investigator who believes that someone is working for cash in hand while claiming benefit might ask that person's bank for details of any deposits of over, say, £50. A bank employee responding to that written request will ensure that only that information is given. If an arrangement were to be set up with the banker under which electronic access is given to records of transactions on a person's account in the way that many bank customers now access their accounts, the record will not be vetted by a bank employee and the investigator is likely to have access to details of all transactions on the account. I look forward to hearing the Minister's response to these concerns.

Lord Goodhart: Unfortunately, my noble friend Lord Russell is unable to be present today because he has gone down with flu. He and I put our names to the objection that Clause 2 shall stand part of the Bill. I have very little to add to what the noble Lord, Lord Astor of Hever, has said on this matter. However, the fact that great concerns have been expressed about Clause 2 by the Information Commissioner, Liberty and Justice--once again I declare that that is an organisation with which I am associated--should give the Government cause for thought and consideration as to whether further safeguards are necessary before Clause 2, as it now stands, can properly be put into effect.

Baroness Hollis of Heigham: The noble Lord, Lord Astor, has pressed me on three points. The first was e-commerce, the second was intentional abuse by investigators and the third was unintentional abuse by them simply because it is the noble Lord's understanding that more information might be returned through the electronic route than by the written route. I understand the concerns.
	As regards the e-envoy, it may be helpful if we follow it up in writing. We simply propose to use electronic access which already exists and which could be used so easily. There will be greater controls on electronic access than on written requests because the former will be tracked and an audit trail made available for DSS arrangements.
	I need to follow up the noble Lord's points as to whether anything may be forthcoming from the e-envoy. I am not aware that there is because of the relatively limited nature of what we are doing in Clause 2. We can do no more under that clause for these purposes than we can under Clause 1, which obviously does not involve electronic access. If there is anything useful that I can add, I shall be very happy to do so.

Lord Astor of Hever: I thank the noble Baroness. We have had a number of letters on this point. I shall be grateful for a follow-up letter, as the noble Baroness has suggested.

Baroness Hollis of Heigham: My understanding is that there is no impingement, but I shall check and make sure that that is correct and write to the noble Lord more fully so that I may specify what overlap there is, if any, or any degree of calibration which may be needed between the two bodies.
	The noble Lord's second concern was intentional abuse and whether we need to use electronic access at all. At the core of the matter is whether obtaining information online from bodies which already hold it electronically is cheaper, quicker and less burdensome than obtaining it through correspondence. One credit reference agency advises us that it would charge £1 per online inquiry, as opposed to £10 per written inquiry; in other words, it is cheaper to use a computer than employ someone to answer a question. If there were concerns about doing it in writing, that would add to the delay. Electronic access is much speedier, and I believe that it is also a useful safety check.
	I should like to reassure the Committee that an authorised officer may obtain only online information that relates to an identified person where there are reasonable grounds to do so. Any inquiry that would not be allowed in writing under Section 109B would not be allowed under these provisions. Therefore, there could not be unintentional abuse, because one could obtain by electronic access only information that one could obtain in writing. One is concerned solely with the mode, not a different kind of information.
	The next point is the possibility of deliberate or intentional, as opposed to accidental, abuse. All I can do is repeat the safeguards against abuse that we shall put in place. Officers who used these powers would require special authorisation from the Secretary of State. They would be located in a central unit in the department's administrative areas, and only a handful of officers would be authorised in each area. The individuals would be of executive officer grade and would be managed by a more senior person. They would receive thorough training under all modules of the Professionalism in Security programme.
	We would give serious consideration to any additional training that private sector organisations wished to provide to people who used their services; for example, BT. Authorised officers would be required to make inquiries in accordance with a published code of practice and fully document their grounds for inquiries. That documentation would be subject to routine checking by managers. In other words, if anyone deliberately abused the access to databases we would know about it. As a result, we would follow it up with disciplinary action and, if necessary, sack the official concerned.
	With regard to local authorities, the Bill recognises that there are differences in the safeguards which they might apply when making arrangements for electronic access, which means that they must obtain consent from the Secretary of State. Again, we are involved in training issues. If necessary, I can provide information about how we intend to train officials. However, I do not believe that the noble Lord requires that information this afternoon. I shall respond to the noble Lord in detail. My understanding is that there is no overlap with issues to do with the e-commerce envoy, but I shall check the position and ensure that the noble Lord is made aware of it by way of a letter in the Library. There should not be unintentional abuse because one can obtain by electronic information only that which one can obtain under Clause 1 in writing. As to intentional abuse, the safeguards that I have listed two or three times should be sufficient. I realise that this may be a source of concern. However, in the light of my response I hope that the noble Lord is able to agree Clause 2.

Lord Astor of Hever: I am grateful to the noble Baroness for her full answer. As to the first point, I look forward to receiving a letter, a copy of which is to be made available in the Library. We shall consider carefully the other points that the Minister raises. We have received a number of approaches from Liberty and the Scottish Law Society. We shall discuss this matter with them and consider the position.

Clause 2 agreed to.
	Clause 3 [Arrangements for payments in respect of information]:

Lord Astor of Hever: moved Amendment No. 60:
	Page 7, line 16, leave out from ("that") to ("in") in line 19 and insert ("arrangements are in force for requiring the making of payments to cover costs").

Lord Astor of Hever: In rising to move Amendment No. 60, I should like to speak also to Amendments Nos. 61 and 62. Amendment No. 60 is a probing amendment to clarify how far the Secretary of State is prepared to go to reduce the very substantial costs to business occasioned by the Bill. The amendment seeks to tighten the loose provisions in the Bill for the recovery of costs incurred by companies as a result of the provision of information. The new wording would make such payments mandatory rather than merely discretionary and ensure that payments accurately reflected the real cost to industry of providing information.
	The Minister partially addressed the issue of cost in responding to Amendment No. 8. However, she said that it was not appropriate to make payments for bulk information requests. The point requires some clarification. As the Bill indicates at least a willingness to contribute to cost recovery by companies, perhaps the Minister can clarify for what the Government envisage paying. Logically, the response of the Minister during consideration of Amendment No. 8 suggested that utilities might--but only might--receive payment for any new software systems that they developed in order to provide bulk information to the Government. However, they will not be compensated for the provision of any bulk information the cost of which is as yet unknown to those companies. I look forward to receiving clarification from the Minister. I beg to move.

Baroness Lockwood: I must point out that, if this amendment is agreed to, I cannot call Amendment No. 61 under the pre-emption rules.

Baroness Noakes: In rising to speak to Amendment No. 60, I should like to refer particularly to Amendments Nos. 61 and 62 in my name and that of the noble Earl, Lord Russell. The amendments are similar in intent; namely, that the Secretary of State should make payments to those who provide information under the new powers created by the Bill. The difference is that Amendments Nos. 61 and 62 are more specific as to who should be paid and how much. I should like to explain why I believe that greater specificity is desirable.
	As to Amendment No. 61, Clause 3 is quite restrictive in terms of who can be paid, not only in relation to the bodies listed in paragraphs (a) to (f) of subsection (1) which notably exclude banks, credit businesses and insurance companies. Even if one is in that list one gets paid only if the Secretary of State believes that it is appropriate. There are further restrictions, to which my noble friend Lord Astor referred, in respect of bulk information provided by utility companies under Clause 3(2). Amendment No. 61 seeks to bring all the bodies which may be subject to a request for information within the scope of reimbursement.
	By their own estimates the Government stand to gain between £200 million to £400 million by the enactment of the Bill. In so doing they will impose new regulatory burdens on those who are likely to need to provide information. Banks, credit businesses and insurance companies, all of which have expressed willingness to assist with the implementation of the Bill, do not understand why there is not even a possibility of payment under the proposed legislation. One must put that in context. According to the regulatory impact assessment, 390,000--or 44 per cent--of all inquiries will be made to banks and insurance companies and another 95,000 will be made to utility companies. They cannot understand why they should not be reimbursed for anything beyond bulk information.
	The Minister explains that the intention largely is to pay those whose business it is to provide information and not others, but I do not believe that that is a general principle. For example, there are provisions in the recently enacted Regulation of Investigatory Powers Act to pay for communications data. Arrangements are in place for that purpose, notwithstanding that the data are already held by those organisations. I do not believe that it is a general principle which should guide the reimbursement provisions of the Bill.
	The regulatory impact assessment says that the extra cost to business is between £2.5 million and £7.6 million. That is another puzzle. Why are the Government concerned about such a relatively small amount in the context of the public expenditure totals of the DSS? A number of those who have looked at this part of the Bill have genuine concerns that the cost to business will be considerably in excess of the stated figure. If it is a larger sum, it increases the case for reimbursement. A number of those who have commented on this matter find it difficult to estimate the cost because, in the absence of a draft of the code of practice that has been referred to, in practice it is difficult to work out what the burdens upon them are likely to be. Amendment No. 61 is about widening the scope.
	Amendment No. 62 is intended to make more specific the payment of the reasonable costs incurred by those who respond to requests for information, not the amount that the Secretary of State believes is appropriate. I accept that, even with that amendment, the big question that remains is: what is the cost? Is it short-run or long-run marginal cost? Does it include the opportunity cost of capital?
	I am not seeking answers to those questions today because they would be better answered by some form of guidance. I seek to probe whether or not the Government will look at Amendments Nos. 61 and 62 and provide a fairer balance between what the state understandably is trying to achieve in terms of stopping massive benefit fraud while relieving the burdens on business.

Baroness Crawley: Before the noble Baroness sits down, can she tell the Committee where is the evidence of the greater cost that she talks of when we are talking about firms that already hold the information that we seek?

Baroness Noakes: I shall try to help. If one is an organisation, say a bank or an insurance company, and there is a great deal of operational data, the actual process of responding to an information request creates an administrative burden, possibly a systems burden and certainly a paper burden. People would be needed to carry out these requests. Therein lies the nature of the extra administrative costs involved. We are talking about very large numbers of inquiries--390,000 for banks and insurance companies and 95,000 for utility companies. We are not talking about one per year per bank, but about potentially large numbers. That adds up to a great deal. Therefore, the nature of responding to individual requests is a large part of the costs. With bulk information, the costs are more likely to be in software amendments and the associated labour costs in processing them.

Lord Goodhart: My noble friend Lord Russell put his name to Amendments Nos. 61 and 62. I, therefore, rise to support the noble Baroness, Lady Noakes.
	I should be interested to know the logic behind the differentiation in the organisations that qualify for repayment of their expenses. For example, why can utility or credit reference agencies be repaid, but no repayments be made to banks, insurance companies or organisations which provide consumer credit? In either case the question is: should the burden of complying with these regulations lie on the customers of the organisations--no doubt the costs will be included in the charges made to customers generally--or should the burden lie on the taxpayer? There is a strong case for saying that in all these cases the burden should rest on general public funds. It is somewhat different from, say, the financial burden of complying with the considerable PAYE regulations where companies do not get a refund; it is an inherent and unavoidable part of their business to employ people. This is a different matter where it would be wholly appropriate for the costs of any business which was called upon to provide information to be refunded as far as is reasonable out of the general taxpayers' funds. Amendment No. 61 would simplify the legislation by requiring costs incurred to be repaid without having to set out a long list of those entitled to repayments and adding a delegated power to add more.

Baroness Fookes: May I press the Minister about the details of what might happen if the Secretary of State brings in regulations? At the moment the legislation is so vaguely couched that one concedes that no regulations or arrangements might be brought in at all. But if the Government intend to do something along these lines, can we have some idea of the way they would approach the problem of reimbursing costs? Like others before me, I am blessed if I can understand the distinctions made between those who fall on the right side of the line and might be paid and those who do not. Also, if arrangements are not made, or do not cover everyone, should the costs be passed on to the ordinary customers of the various institutions? That seems to me to be grossly unfair.

Baroness Hollis of Heigham: I shall do my best to answer the questions raised. Amendments Nos. 60, 61 and 62 relate to payment for information. Amendment No. 60 seeks to impose a duty on the Secretary of State to ensure that arrangements are in force for requiring payments to be made to cover costs to persons on the list in Clause 3(1) in respect of information obtained under these new powers.
	Amendment No. 61 seeks to impose a duty on the Secretary of State to ensure that arrangements are in force, as he thinks appropriate, for requiring payments to be made to persons on the list in new Section 109B(2A) in respect of information obtained under these new powers. He could decide not to make any arrangements at all. However, his decision could be judicially reviewed and he would need reasons for choosing to make arrangements to pay some organisations and not others.
	Amendment No. 62 seeks to require the Secretary of State to pay information providers an amount equivalent to the costs they have reasonably incurred. Let me address the concern made by a number of Members of the Committee about whether organisations are on--as the noble Baroness, Lady Fookes, said--the right or the wrong side of the line. I shall first explain why we have listed the organisations we have at Clause 3(1). Our starting point is that where organisations are required by law to provide information to government, we do not pay for it. That is a well established principle.
	Companies have to provide extensive information to the Inland Revenue, Companies House and so on, but are not reimbursed; rather, they suffer penalties if they fail to comply. The Inland Revenue, for example, does not pay for such information. Citizens must pay and bear the costs of complying with laws passed by Parliament for the common good. As noble Lords have said, the only exception is under RIPA, the Regulation of Investigatory Powers Act 2000, which provides powers for a wider cross-section of the public sector to obtain information about telecommunications.
	The Bill follows the principle that governs when the Inland Revenue pays for information. Like any other organisation, the Inland Revenue purchases relevant commercially available information where the provider is under no statutory obligation to provide it. The Data Protection Commissioner, now the Information Commissioner, requires organisations to complete detailed registrations of their data holdings, purposes, suppliers and recipients, but she does not pay them for this information. Banks are required to report suspicions of money laundering to the National Criminal Intelligence Service; businesses in general are required to make VAT returns to Customs and Excise; the utilities are required to provide information to the regulator to enable him to carry out his statutory duties; and so on.
	Since the 1940s, the DSS has had power to require information from employers about their employees. Again, that is not paid for. However, although the general principle is that government do not pay for information that they are authorised by law to collect, when we were considering bringing forward these new powers we were persuaded that there were special reasons for making an exception to these general principles in the cases outlined in Clause 3(1). We think that it is reasonable to pay those organisations that make their living from supplying information in return for payment. That is why we brought forward a power to pay credit reference agencies. We also think that it is reasonable to pay the utilities for extracting data on consumption--the bulk data--as outlined at new Section (2D) in Clause 1(2). That is because they are the only organisations included in the Bill which will be asked to provide information for the purposes of electronic matching. That approach is in line with the department's approach to the Royal Mail, which we also pay for providing electronic data for matching.
	We included telecommunications companies because they have invested in special technology to help to meet government inquiries. Members of the Committee will note that these powers do not allow us to require organisations to alter their procedures or to invest in special technology, and so on. That is why telecommunications suppliers are in a special position.
	Clause 3, as currently drafted, requires the Secretary of State to make such payment as he considers appropriate, whereas the amendment states that payments should cover costs. If the Secretary of State exercises his powers unreasonably, his decision is subject to judicial review and would be set aside if it were found that he had acted unreasonably.
	The amendments risk plunging the department into complex negotiations and renegotiations with each supplier of information about what they consider to be the reasonable costs of providing each and every piece of information. Needless to say, the view of a business as to what is reasonable will be guided by considerations different from ours. Companies have a legal duty, quite correctly, to protect the interests of their shareholders and their customers. Clearly, that means providing the best return on investment. The better way, as already provided in the Bill, is for the Secretary of State to be able to meet what costs he considers appropriate and to have that power curtailed or curbed where necessary by judicial review. The alternative, as proposed by this amendment, is the power for some businesses to delay the use of these powers by haggling over the cost of providing information needed to fight benefit fraud.
	The amendments would also have the effect of restricting what we could pay those organisations which make their living from selling information--that is, the credit reference agencies. Currently, we propose to pay them the market rate for their services, but if this amendment were to succeed we would be able to pay them only their costs.
	I can give the assurance that we will enter into early negotiations with businesses eligible for payment to establish a fair price. Officials are holding regular meetings with business to agree the terms of a code of practice. That will cover arrangements for payment. We have already told credit reference agencies that we will pay them the going rate for access to their data. This is fair and proper. It is in everyone's interest to fight fraud. Companies pay taxes as well as individuals. It is this tax revenue which funds the social security system, and which is being stolen. Businesses operating in the informal economy which do not pay their dues in tax and national insurance, and which employ people who are committing benefit frauds, compete unfairly with businesses which are responsible corporate citizens. Our demands will not be unreasonable. We will seek to make our inquiries in a way which minimises the cost. But business has a duty to help government to fight crime.
	Nor do I accept the proposition that businesses cannot afford to help us to fight crime. We have estimated in the regulatory impact assessment that the cost of compliance to information providers will be between £2.5 million and £7.5 million. Taking the higher amount, some £3 million of this would fall to banks and building societies. Divided among the top seven, this would be a cost of under £500,000, which is significantly less than the remuneration which any one of them paid their top executive in 1999, according to their annual reports. We are talking about cost to them of perhaps £400,00 or £450,000. One such company paid its top man £3.25 million a year in salary. The pleadings of poverty from the business sectors from which we would seek information simply do not stand up to close scrutiny. If I were to be pressed on this point, I should be happy to read into the record top salaries and profits before tax of the major companies--£2.5 billion for Barclays Bank and so on--from the 1999 annual reports. I am happy to take up the Committee's time in reading this information into the record, but I hope it is felt that I have made my point. In the light of my explanation, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Astor of Hever: Before I respond, will the noble Baroness clatify two points? First, do the Government have an estimate of the cost to these outside bodies that have fallen on the wrong side of my noble friend's line? Secondly, did I hear the Minister correctly when she said that she was going to enter into negotiations with the commercial credit reference agencies? I assume that they will be paid commercial rates.

Baroness Hollis of Heigham: I think that I addressed both those points at length in my answer. On the second point, the answer is yes. On the first point, I was estimating the higher figure of £7 million to be the top figure falling on businesses. The share of that apportioned out would come to something like £450,000 to £500,000 per bank. I was setting that against the profits of £2.4 billion for Barclays Bank, £1.25 billion for the Halifax, £3.6 billion for Lloyds TSB, £1.2 billion for the Royal Bank of Scotland, £3.8 billion for British Telecom, and so on. I hope that in the course of my earlier remarks I addressed the points raised by the noble Lord, Lord Astor.

Lord Goodhart: Before the noble Baroness sits down, is it not also true that there has been a good deal of publicity from time to time about some of the very high salaries paid to the chairmen and chief executives of some of the utility companies? Many of those companies make very large profits. Would not that argument then lead to the implication that no payment ought to be made to any organisation or business?

Baroness Hollis of Heigham: In Committee last Thursday I tried to make the distinction between the payments to the utilities for bulk information for which they would need to put in place new software packages and the rest, and the individual inquiries--they hold that information already--for which they would no more be paid than would a bank or building society. In that sense I hope that I have addressed the point made by the noble Lord, Lord Goodhart.

Lord Astor of Hever: We are very disappointed with the Minister's response. Her point about pleadings of poverty being untrue will disappoint the business sector. There will be substantial costs to business. Legitimate businesses and individuals are not there to act as a branch of government administration. We shall consider these points very carefully and may want to return to them at the Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 61 not moved.]

Lord Higgins: moved Amendment No 61A:
	Page 7, line 34, at end insert--
	("( ) any local authority;").

Lord Higgins: In moving Amendment No. 61A it will be convenient to discuss Amendment No. 62A. Amendment No. 61A is a paving amendment for Amendment No. 62A, which suggests that at page 8, line 17 we should insert:
	"For the purpose of complying with duties under this section, the costs of doing so shall be met by monies provided by Parliament".
	The issues raised by these amendments, while they relate to the question of payment, are significantly different from the amendments we have just discussed. In that context, given the speech by the Minister, I am not clear how much the chairmen of credit rating agencies are paid and whether that supports her argument. No doubt, they are paid very small amounts.

Baroness Hollis of Heigham: Equifax and Experian are both international companies with business worth £15 billion to £20 billion and having across the world 16,000 employees. I suspect that their position is rather different from a company based in the United Kingdom.

Lord Higgins: Nonetheless, it means that they can probably afford to bear the costs in the same way that the banks or building societies can, according to the Minister.
	Amendment No. 61A is concerned with local authorities. There are significant differences. In the very helpful meeting that was held with the Minister, her officials and others, the view was expressed that the money which the local authorities were failing to protect was the money belonging to central government. Therefore, it seems not inappropriate to suggest that if one is going to take measures to prevent such fraud, the costs of that should fall upon central government rather than on local authorities. Not surprisingly, that is the view of the Local Government Association.
	The point goes wider than that. The expenses that the local authorities will incur are not simply those involved in operating the system to prevent fraud, particularly housing benefit fraud. In the view of the local authorities, the effect of the provisions in the Bill will impose other strains upon them. They refer, in particular, to the Government's proposals for the so-called "two strikes and you are out" policy that might mean that individuals in a local authority area find that they are rendered homeless. That would involve additional costs. That is the view of local authorities.
	Local authorities are also worried about the effect the proposals may have if the costs are borne by them rather than by central government. For example, they suggest that the standard spending assessment will apparently remain the same but they will have to cover the cost of operating the proposals in the Bill. The result of that will be that they have fewer resources to carry out the normal duties of a local authority. If the money that they were saving was their money, that would be one thing. As I understand it, the Government's position is that it is central government's money. We will find a reallocation of resources between central and local government as a result of local authorities having to bear this cost--there is apparently not to be an adjustment in their standard spending assessments--and local services will deteriorate.
	It is also the case that there will be differences between one local authority and another. Local authorities in particularly deprived areas, where there is perhaps a tendency for people to find that they are engaged in activities of a kind which the Bill is intended to prevent, will find that their resources are reduced more than those provided to other better off areas which are less likely to engage in some of the forms of fraud with which the Bill is designed to deal.
	Local authorities feel that they are being discriminated against because the power given to them in the Bill is limited compared with the power given to the DSS.The ability to check bulk information from utilities as an indicator of residence is at least as relevant, if not more so, for housing benefit and council tax benefit as it is for central government. If I understand the Bill correctly, central government and the Department of Social Security will be able to use such bulk information but local authorities will not. To that extent, not only will local authorities be lumbered with the costs incurred in protecting central government's money, as they see it, but they will also be handicapped because the provisions of the Bill will not be equally available. Local authorities will have fewer resources in the sense of additional information to do their job than the Department of Social Security. Local authorities feel that they are being hard done by. My amendments would cover most of the problems.
	There are significant differences between local authorities. In a news handout on 30th January the London Borough of Wandsworth pointed out that it is being commended on the action it has taken against fraud. That is in contrast to a report from the benefit fraud inspector relating to Camden and one or two other local authorities. There is a discrepancy. It may be that the resources available to Wandsworth to cover the cost of the Bill's proposals are smaller than those made available to other more deprived areas.
	It is interesting that the report on Wandsworth by the department's independent benefit fraud inspector noted that Wandsworth had done very well because of a new verification programme which it had instituted. The Minister indicates assent. To what extent will the verification process, which presumably will effectively fulfil the objectives of the Bill, be extended nation-wide? The noble Baroness said that there are 409 local authorities in all. How many of the 409 are likely in the near future to adopt the verification process, which apparently has been so successful in the London Borough of Wandsworth?
	In particular--I first raised this point with the noble Baroness a long while ago--to what extent will there be standardisation of the forms used by local authorities for housing benefit? Given the problem of housing benefit fraud, it is extraordinary that there still appears not to be a standard form, though again the department's benefit fraud inspector has commended the form used by the London Borough of Wandsworth.

Baroness Hollis of Heigham: Three mentions and they are in.

Lord Higgins: That is true. Alternatively, with some of the other boroughs, three mentions and they are out. But that would be a sordid party political point to make, which did not cross my mind for one moment.
	There are differences in ability and determination to deal with these problems. I cannot help but feel that the arguments put forward by the Local Government Association show that local authorities will be operating the provisions of the Bill with less enthusiasm and efficiency than would be the case if it was made clear to them that the Government are seeking to protect central government money--that is the view expressed by the Minister--and that therefore it is appropriate that the cost of doing that should not fall on those paying local taxes. It would be far more appropriate, efficient and effective if it were done on the basis of national financing of local authorities for carrying out what is effectively for the benefit of central government. If that is not done, it will be to the detriment of local authorities and local communities.
	I hope that the Government will accept what is a sensible amendment put forward by local authorities. I look forward to hearing what the Minister has to say. I beg to move.

Baroness Hollis of Heigham: I hope that I shall be able to answer all the noble Lord's points. These amendments--the paving amendment and the substantive amendment--seek to explore how local authorities will be funded to meet the cost of any of the information that they have to pay for under these provisions. The provisions on obtaining information do not require local authorities to do anything new. They merely add to the means at their disposal for detecting and preventing housing and council tax benefit fraud.
	Local authorities already receive an annual subsidy for administering housing and council tax benefits, which includes the detection and prevention of fraud. These arrangements are already enshrined in our legislation--at Section 140 of the Social Security Administration Act 1992.
	These provisions also provide powers for additional subsidies for specific action. Specific subsidies are provided for action taken to prevent fraud, such as work under the verification framework. The noble Lord asked specifically what proportion of local authorities had now adopted a verification framework. The information from the Audit Commission report for 2000 is that 44 per cent had done so. In the previous year, 1999, the proportion was only 19 per cent. Therefore, we can already see how far local authorities have moved. The Government have made available £100 million over three years to meet the costs of all local authorities adopting the framework. As a result, the number taking it up is rising. We are meeting the costs of that initiative.
	Specific subsidies are also provided as a reward for the fraud that local authorities detect. The more fraud they find the more subsidy they receive. These powers should make it easier for local authorities to detect fraud. For example, a local authority may receive a tip off that a housing benefit claimant had been bragging about the savings and investments that he had, none of which he had declared on his housing benefit claim. If the claimant denied having any savings, there is no way at present that the local authority could independently check that. With these new provisions, it could check with a credit reference agency to find out to what financial organisations the claimant had applied to open accounts with and then check those financial organisations to find out whether he did in fact have any savings. So, far from putting local authorities at a disadvantage, the ability to check information with independent sources will enable them to find more fraud and consequently to increase the subsidy they receive. If the Committee would like me to do so, I could spell out the degree of subsidy they actually get and the degree to which, if they go above a certain threshold, they receive additional proportions of the money saved and detected. Thus, there already exists a means of paying them for the inquiries they make of organisations; they are paid a reward.
	The noble Lord suggested that the level of subsidy provided to local authorities is insufficient. We believe that it is sufficient. We have increased the amounts available to local authorities for the next three years. The increase generally for 2000-01 is 2.5 per cent, which is in line with inflation, but the housing benefit caseload has decreased by approximately 6 per cent. This recognises that local authorities have transferred some of their stock to housing associations and that those housing benefit cases may now be more complex. I could go on to talk about the subsidy arrangements and the incentives being provided for those, but I am sure that what we are doing is fully adequate.
	The noble Lord asks why local authorities do not have the same range of powers as the DSS; and I am saying that they do, with two exceptions. One is that only the DSS may obtain information on the quantity of supplies of utilities, that is, the bulk data. That is because the bulk data is matched against our records of housing benefit provided to us by local authorities. We then send any potential problem cases involving housing benefit back to the local authorities with the appropriate information.
	The other small exception is that local authorities will need the consent of the Secretary of State before entering into arrangements to obtain electronic access to records. This came up when we discussed amendments moved by the noble Lord, Lord Astor, and I tried to explain that we wanted local authorities to have the positive consent of the Secretary of State to ensure that they had verification frameworks, good reports and a benefit fraud inspectorate in place, to ensure that this information was not just floating around in inappropriate ways, as the noble Lord, Lord Higgins, put it.
	I hope that I have addressed the points raised by the noble Lord and that I have assured him that we shall provide the information that he seeks and that the concerns of local authorities over meeting the costs of data collection and relating to prosecution are not as significant as he fears.
	On the noble Lord's point about homelessness, we are expecting perhaps only 150 to 300 cases across the country where housing benefit is affected. He will know that if you commit an offence against housing benefit, it is not housing benefit that will normally bear the penalty but income support or JSA. This is quite deliberate, because we are not seeking to make people homeless, particularly those with families. The number of cases where housing benefit is affected is not expected on average to be more than one case per authority. His fear about the cost to local authorities of dealing with any homelessness that might result should not arise in practice.
	I hope that I have reassured the noble Lord's concerns about the verification framework, payments for subsidy for detecting fraud and the unwarranted fears of local authorities about homelessness.

Lord Higgins: I am grateful to the noble Baroness, as always, for that full reply. It leaves one very clear question in one's mind: why is it that the Local Government Association seems to be totally unaware of the points the noble Baroness was making with regard to the extent to which there are already provisions in standard spending assessments to cover the prevention of fraud? It may regard the amount as inadequate, but at the moment the representations we receive seem to suggest that it is completely unaware that any of the money that it receives is supposed to be devoted to this purpose. That seems quite extraordinary.
	On the noble Baroness's final point, she said there was only likely to be one case per local authority, perhaps less. It would thus appear that the amount of extra money we are going to obtain as a result of this proposal will not be very great. That is in terms of prosecutions--

Baroness Hollis of Heigham: I think the noble Lord may have misunderstood me. I am not saying that there will not be a vast number of offences against housing benefit, but, as he will know, housing benefit is sanctioned, and money lost from housing benefit, only if there is no other qualifying benefit against which the sanction may be met. For example, if someone committed an offence against housing benefit, and most people (although not all) getting housing benefit are on income support or the JSA, the deduction would be against income support or JSA, even though the offence was committed against housing benefit. This is a way of protecting families against homelessness. As I said, our best estimate is that only 100 to 150--or a number of that order--will face an actual reduction in housing benefit, as such, which might produce a situation where someone could not afford to pay their rent.

Lord Higgins: Again, I am grateful, but this seems to suggest that the Local Government Association, which raised the point about the possible cost of homelessness and so on, is not aware of what is happening on the ground. Moreover, it seems that the department is not telling local authorities; so this is a rather strange situation. One presumes that the representations one has received were no doubt made in good faith, but the association seems to be unfamiliar with the situation described by the noble Baroness.

Baroness Hollis of Heigham: I entirely take the noble Lord's point. Perhaps it would be helpful if I repeated my answer in the form of a rather long letter to him. We could not only put a copy in the Library, but also send a courtesy copy to the Local Government Association so that it could circulate the contents to its members. Would that meet the noble Lord's concerns?

Lord Higgins: Yes, I think so; because there seems to have been a rather serious breakdown of communication. I now understand the point which the noble Baroness is making about there only being one case where housing benefit fraud is involved, because it is likely that fraud applies not only to housing benefit but to other benefits as well.

Baroness Hollis of Heigham: Even if there was no fraud against income support and JSA, and the fraud was only against housing benefit, the benefit sanctioned would be income support or JSA. Is that understood?

Lord Higgins: Yes, I understand the point which the noble Baroness is making; I hope that the Local Government Association might also. We need to see whether we can improve the communication. If the noble Baroness is prepared to answer in the way she has outlined, preferably as soon as possible, we can see whether on Report we get a rebuttal showing that it is not the Local Government Association but the Department of Social Security which is unaware of what is happening at the front end.
	It is obviously very important that fraud against local authorities should be dealt with also, and the noble Baroness has pointed out that they will be able to check their data against that provided by the department, as far as bulk data is concerned. That is probably a sensible arrangement and we certainly agree with what the noble Baroness said with regard to electronic communications: that local authorities will be allowed to search for data on individuals only if their system is approved by the Secretary of State.
	Having said that, it does seem rather an awful situation if we cannot trust the local authorities to deal with these matters in the way one would wish, so that the Secretary of State actually has to check up on them to see whether their computer systems are or are not inviolate. A great deal of data will be held on those computers, which would suggest that this is a matter of some concern.
	However, these are not matters for the Department of Social Security but rather for the Department of the Environment, Transport and the Regions, the department concerned with local government. In the light of the Minister's kind assurance that she will write in the way she has described, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 62 and 62A not moved.]
	On Question, Whether Clause 3 shall stand part of the Bill?

Lord Goodhart: The issues I sought to raise on whether Clause 3 should stand part of the Bill have been covered, to a large extent, in the debate on the first group of amendments to the clause. For that reason, I do not think that any useful purpose would be served were I to pursue them.

Clause 3 agreed to.

Lord Higgins: moved Amendment No. 63:
	After Clause 3, insert the following new clause--
	:TITLE3:CODE OF PRACTICE
	(" .--(1) The Secretary of State shall prepare a code of practice on the use and processing of personal data for purposes associated with the provisions of this Act or the relevant provisions of any enactment amended by this Act.
	(2) A copy of any code of practice prepared under the provisions of this section shall be laid before Parliament.
	(3) Before he lays before Parliament a copy of any code of practice prepared under this section, it shall be the duty of the Secretary of State to publish a draft of that code and consider any representations made to him about that draft by--
	(a) the Data Protection Commissioner, and
	(b) any other person or body,
	and he may modify that draft accordingly.
	(4) A code of practice prepared under the provisions of this section shall not come into effect until it has been approved by resolution of each House of Parliament and issued by the Secretary of State.
	(5) The Secretary of State may from time to time revise the whole or any part of a code of practice issued under the provisions of this section, and the provisions of subsections (1) to (4) above shall apply to any such revision, with appropriate modifications.
	(6) It shall be the duty of the individual nominated by the Secretary of State to keep under review compliance with any code of practice issued under the provisions of this section, and in pursuance of this duty he shall have power to require the provision of any information necessary to him in the discharge of this duty.
	(7) Where the individual nominated by the Secretary of State considers that the provisions of any code of practice issued under this section have been breached, then such a breach will be deemed to be a breach of the principles to which that part of the code relates.
	(8) The Secretary of State shall lay before Parliament annually a report on the monitoring of compliance with any code of practice issued under this section.").

Lord Higgins: In moving this amendment, it may be convenient if I speak also to Amendment No. 102. This rather lengthy amendment seeks to insert into the Bill a new clause which would, in effect, provide a draft code of practice. We have spent a great deal of time discussing the code of practice in the course of our debates. When we had our helpful informal discussions with the Minister, we understood that the code of practice would be produced between now and Report stage. That is extremely important if we are to ensure that many of the doubts which have been expressed can be dealt with adequately through a code of practice rather than on the face of the Bill. Obviously, some proposals can appropriately be dealt with in that way. However, when we see the code of practice we may find that other points ought to be incorporated into the Bill.
	Amendment No. 102 amends the commencement provisions by stating that,
	"no such statutory instrument shall be laid until an order containing the code of practice for the administration of this Act shall have been approved by both Houses of Parliament".
	This may be a technical problem in that, before it is introduced, it would be desirable for the House and another place to be given an opportunity to express their views on a code of practice and, if possible, to suggest amendments to it. We shall need to see how that might be done either on Report or at Third Reading.
	It will not be a simple matter to devise the code of practice. A large number of aspects of the Bill, in particular those which have been raised by the Information Commissioner and by Justice, have given us cause for concern. I believe that we might also be able to tighten up the proposals as regards the extent to which the investigation to be carried out is justified and so forth. Perhaps the noble Baroness can now confirm that the code of practice will be published between now and the Report stage.
	In Amendment No. 63 we have drafted a form of words which reflect a certain degree of plagiarism. I understand that this code of practice was suggested in 1997 by the Labour Party spokesman on a similar issue--Mr Henry McLeish was the author. Although some things have changed since 1997, I doubt whether this issue has changed to any great extent. Perhaps we should begin by adopting this code and then seek to amend it at later stages.
	At this point, can the Minister tell the Committee whether the Government envisage producing a comprehensive code of practice? Can she also confirm whether the Information Commissioner--I must say that I thought the title, "Data Protection Commissioner" was rather better--will be involved in the preparation of the code? Will the code that we see at the next stage have been approved by her? If that is the case, then a great many of the qualms which have been expressed about the terms of Clause 1 will be alleviated. Perhaps the noble Baroness can bring us up to date and let us know the state of play. I beg to move.

Lord Goodhart: I support the noble Lord, Lord Higgins, on this matter. The code of practice will be extremely important, in particular as regards the concerns raised in connection with Clause 1 on the infringement of human rights. If we are not to have any degree of judicial control put in place over the use of the powers under Clause 1, then a good, solid code of practice will be absolutely essential. Furthermore, it is strongly desirable that we should have not only a code, but a code that is subject to a measure of parliamentary control. The initial version should be subject at least to the affirmative resolution procedure, as is proposed here.
	I am not sure that I agree with some of the drafting in the amendment. Subsection (7) of the proposed new clause is a little unclear in its meaning and effect. I believe that we may also encounter problems with Amendment No. 102, which would prevent the Bill being enacted until a resolution had been passed. Nevertheless, I agree with the principle and I am happy to express my support.

Baroness Noakes: In expressing my support for the amendment, perhaps I may widen the scope a little. As drafted, it covers the use and processing of personal data. However, another area is causing concern. At the briefing given by the Minister before we began our deliberations in Committee, she spoke of the way in which the code of practice would exactly cover how the powers are to be used and how business will interface with the DSS and local authorities. That is important and will cover many unanswered questions being put by the corporate organisations which will be affected by the new powers.
	Although what I have pointed out is not contained in the wording of the proposed new clause, I should be grateful if the noble Baroness could express her view on the matter.

Baroness Hollis of Heigham: We have always intended that the information gathering provisions in Clauses 1 and 2--although not for the rest of the Bill--would be subject to a code of practice. Noble Lords will recall that I explained during the first Committee day what the code might contain. However, it may be helpful if I specify in greater detail the kind of issues to be addressed by the code.
	I should say also that noble Lords will receive a draft version of the code of practice before the Report stage. It will draw on comments made by noble Lords and also by business. That may provide the opportunity being sought by the noble Baroness, Lady Noakes. The final version will be shown to the Information Commissioner. That explains how we aim to proceed.
	The code of practice will cover the following issues: why we need to make inquiries; the extent and nature of the new powers; who can use them; how we will authorise officers to make inquiries; the standards to be expected from those using the powers; how we will safeguard the information obtained; what kind of information we will require; what will be done with the information; penalties for misuse of the powers; from whom we will require information; how we will get it; how we will manage our requests for information; the statutory duty to provide information; who will be the data subjects; what are reasonable grounds; training of staff; what checks we will make to ensure that our requests are lawful; the safeguards in place to ensure confidentiality and security; appeals and complaints procedures; rights of subject access; principles of electronic access; human rights compatibility; data protection compatibility; and paying for information. The code will set out the distinctions between making inquiries about individuals and bulk matching. Indeed, it will be written in a way that will meet the concerns of three audiences: the investigator, at whom it is primarily aimed; the data provider and the data subject.
	I have taken up the Committee's time with that explanation because I thought it might be useful before we come to Report stage to specify the code. I hope that the Committee will agree that it is extremely full and that it meets any residual concerns.
	Complaints about DSS staff will be addressed to the professional standards unit of the office of our chief of investigations, as will complaints about local authorities if complainants do not get satisfaction from the local authorities themselves.
	We all agree that the code of practice should provide a clear guide to authorised officers, setting out the limitations of their powers and the standards of behaviour expected of them when conducting their inquiries. We have discussed previously in Committee the level of experience we can expect those officials to have. We have already consulted with representatives of business and we are seeking to meet them in regard to working on the draft and before the draft becomes the final code of practice.
	The new clause proposed in Amendment No. 63 contains a number of detailed provisions relating to the code of practice. There is a great deal within the proposed new clause with which I concur, although I am not convinced that it all needs to be included in the legislation. It is important to produce a draft code of practice for consultation--which we shall do--and that the consultation should be widespread and include the Information Commissioner and the organisations likely to be required to provide information. Our commitment to consultation is clear. When the code is published, it will be relevant to all decisions by authorised officers to request information under the new powers.
	I listened to the debates on Second Reading and at last week's Committee stage. That is why I have tried to spell out what will go into the content of such a code of conduct and to ensure that business will have ample opportunity to take part in consultations and to comment upon it.
	I recognise the concern about the need for additional certainty on this issue--which is the point behind the amendment--and I should like to consider further whether, and in what form, the Bill should contain provision for a code of practice on Clauses 1 and 2. If the noble Lord will agree to withdraw the amendment, I shall endeavour to bring forward a government amendment on Report to address that concern.
	As to Amendment No. 102, the noble Lord, Lord Goodhart, has already done his "this is a wrecking amendment" speech because it is technically flawed. He is, of course, absolutely right. It was never our intention to commence the provisions in Clauses 1 and 2 without a code. The problem with the amendment is that it makes the whole Bill subject to a code of practice and we could not implement any part of it without one. I cannot think that that is what the noble Lord intends.
	I could go on, but it may be that in the light of the heavy guns fired by the noble Lord, Lord Goodhart, and the grapeshot from myself, the noble Lord, Lord Higgins, may feel that he does not wish to pursue this matter either. I shall not continue with my remarks as to why it would be inappropriate to apply it to colluding employers, benefit penalties and so on because I cannot believe that that is what the noble Lord intended. The code of practice is not relevant to that part of the Bill.
	In the light of that explanation and the rather full description of what may be contained within the code of practice, together with reassurances about not only consultation but seeking to give it some security by returning with an amendment to place it on the face of the Bill, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Higgins: Perhaps I may deal, first, with the point raised by the noble Lord, Lord Goodhart. Now that I look at the amendments and the way in which they interact, it seems to me a rather good way of proceeding. Perhaps one should consider adopting as normal practice that a Bill should not come into operation until the statutory instruments authorised by the Bill have been considered. No doubt there would be problems with that. I accept fully what the noble Lord, Lord Goodhart, said.
	The noble Baroness said that at Report stage we would have a draft of the code of practice. We welcome that. It is a sensible way of proceeding; goodwill will flourish and we shall do what we can to improve matters. However, I was slightly puzzled when she said that the House will have a draft of the code of practice at Report stage but the Information Commissioner will not receive it until it is final.

Baroness Hollis of Heigham: No. Perhaps my remarks were obscure. I was taking it for granted that, like other people, the Information Commissioner would be commenting on the draft. The final report--which is the framework within which the Information Commissioner would seek to scrutinise subsequent DSS activity--would be laid before her.

Lord Higgins: I now understand. Again, that is a sensible way of proceeding. It would perhaps be helpful if the noble Baroness could comment on two points. It appears that the code will cover only Clause 1 and Clause 2, which deals with electronic access to information; it will not cover any of the other aspects--for example, colluding employers--which, no doubt, will have to be dealt with on the face of the Bill.
	The Minister also opened the door a little towards saying that one might consider whether some of the items one could put in the code of practice should not be put on the face of the Bill. Again, that is something we shall need to consider.

Baroness Hollis of Heigham: I said that I was willing to reflect on the matter--partly in response to pressure from the noble Lord, Lord Goodhart. At the moment, the code of practice exists only in so far as I have stated. I have said that I am willing to come back with amendments to say that there will be a code of practice on the face of the Bill, which then gives it statutory authority. That is sometimes done, it is sometimes not done. If it is satisfactory to the Committee to give it that basis, that may be helpful. Obviously, matters such as colluding employers raise completely different issues from those connected with data protection, with which the code is associated.

Lord Higgins: That is extremely helpful. We shall seek to co-operate. I have said throughout that we are as anxious as the Government to prevent fraud--if not more so. The side effects of the proposals are difficult, in particular the question of whether there should be some degree of supervision over the department in deciding whether a particular case should be investigated. We need to consider that further, not least in the light of what the noble Baroness said about the heavy end of the market as against the light end and so on.
	We look forward to seeing the draft. We should perhaps consider the timing. Obviously, the sooner we can see it the better. I assume it must already be in draft. We should also consider whether some time should elapse between Report stage and Third Reading in order that any outside representations we receive can be taken into account in the subsequent discussions on the code.
	The Minister is being very forthcoming and we are anxious to ensure that the matter is dealt with in a reasonable manner. I am sorry about Amendment No. 102--which drew such scorn from the noble Lord, Lord Goodhart--but we cannot have everything. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 64 not moved.]
	Clause 4 [Exchange of information with overseas authorities]:

Lord Astor of Hever: moved Amendment No. 65:
	Page 8, line 21, leave out ("it appears to the Secretary of State") and insert ("the Secretary of State is satisfied").

Lord Astor of Hever: In moving Amendment No. 65, I shall speak also to Amendment No. 66. Amendment No. 65 probes the standard of satisfaction which must be achieved before the Secretary of State would exchange information with overseas authorities. Clause 4(1) specifies the conditions which must be in place before the Secretary of State can disclose information to an overseas authority. At present, it is sufficient if it "appears" to the Secretary State that adequate safeguards are in place to prevent any improper use of information. We believe that these provisions are of sufficient importance that the Secretary of State should be "satisfied" that the requirements of that subsection have been fulfilled.
	Amendment No. 66 ties in with the two earlier amendments relating to a code of practice and standards. Clearly, the reliability of any information received from another jurisdiction will vary. Ministers should explain what they intend to do to ensure the reliability of information, and on what basis they will rule out, or rule in, information with regard to a particular jurisdiction. What information will be given, or will not be given, to authorised officers about the reliability of a particular source? How will that information be reviewed; and how will its quality be tested? I look forward to the Minister's response. I beg to move.

Baroness Fookes: I strongly support the amendment. It is a matter for concern that security should be satisfactorily achieved when other countries are involved over which we have no jurisdiction. Therefore, this proposal is particularly important.
	Perhaps I may briefly hark back to the code of practice. As I understand it, the code of practice will relate only to Clauses 1 and 2. I should have thought it entirely reasonable that it should relate also to Clause 4, dealing with the exchange of information with overseas authorities.

Baroness Hollis of Heigham: I have quite a full answer to this amendment; as this is a technical issue, perhaps Members of the Committee will bear with me. I could merely address the direct points, but it may be useful if I set out some of the background.
	Both amendments relate to Clause 4, on the exchange of information with overseas authorities. Amendment No. 65 is about the standard of satisfaction that must be achieved before the Secretary of State would exchange information with overseas authorities. Amendment No. 66 seeks to substitute the word "necessary" for the word "reasonable" in new Section 155A(3) which the Bill would insert into Part XIII of the Social Security Administration (Northern Ireland) Act 1992. The clause requires all reasonable steps to be taken to secure that information obtained from another country is not used for any purpose not authorised in the understanding to exchange information with the other country.
	Of all the clauses in the Bill, Clause 4 has attracted the least amount of comment and the greatest degree of support in our public consultation exercise. Transnational benefit fraud is a serious problem. It is sufficiently serious for the Council of the European Union to pass a resolution on 22nd April 1999 on a code of conduct for improving co-operation between authorities of member states concerning the combating of transnational social security benefit and contribution fraud and undeclared work, and the transnational hiring out of workers. But it is difficult to say how serious, as we simply do not have the information we need to see the full implications. We know from the cases that come to light that many are organised and involve large sums of money--for example, the gang who hijacked the identities of 171 Irish citizens to make false claims. I mentioned this case at Second Reading. The problem is not peculiar to the UK and Ireland. The German and Dutch authorities are concerned about the problem of people claiming unemployment benefits in one country while crossing the border daily to work in the other.
	What this clause is not about is cracking down on asylum seekers, who are in any case now supported by the new Home Office arrangements and not the benefit system. I repeat the categorical assurance that I gave earlier that the powers in this clause would not be used to pass information about a person seeking asylum in the UK to the government of the country from which he had fled.
	The Information Commissioner has an important role in this, in that she participates in the work of the "Article 29 Committee", set up under the EU data protection directive to advise on data protection issues arising at a European level. The committee's recent work includes consideration of the level of personal data protection in certain non-EEA states to produce an approved list. We should not consider entering into an arrangement to exchange data with any country that did not meet with her approval. That is a strong statement.
	We envisage that such exchanges would be with a limited number of countries, where there was evidence that transnational benefit fraud could exist. This is likely to be our near EU neighbours, in particular Ireland--geographical proximity clearly increases the scope for cross-border fraud--and countries outside the EU with which we already have a close relationship.
	A Memorandum of Understanding between the government of the United Kingdom and the overseas government would govern any arrangements that we enter into. The process of agreeing the terms of that understanding would provide ample opportunity to explore safeguards. Any document prepared for UK signature would have been closely examined by lawyers not only at the DSS, but also at the Foreign and Commonwealth Office, who will have close regard to human rights and data protection issues. We would not enter into any arrangements with any country that did not have adequate arrangements in place against improper use of information, or due regard to human rights. We would take into account all relevant information: the character of the regime, the administrative safeguards as well as the legal ones, and the political relationship between our countries, to name but three. We clearly would not enter into a relationship with any country that did not have a stable democratic system of government, and we would terminate any existing arrangement if circumstances changed for the worst. Again, that is a very strong statement.
	We have already agreed a Memorandum of Understanding with Ireland on closer co-operation to combat transnational social security fraud. The measures in the Bill would provide the legal basis for the DSS to disclose information to the Irish Social Security Department. However, we would not use these measures until the Irish Government had also secured legislation. The text of this memorandum is publicly available. Any other such arrangements would also be made publicly available.
	What we cannot do under existing powers, which is why we are seeking to include this clause, is to exchange information in bulk. What we seek to do, when the enabling legislation is in place in both the UK and Ireland, is to match our entire social security live load to pick up the people who are claiming in both jurisdictions--or appearing to do so, as many may be the victims of criminals who appropriate the identities of innocent citizens to make false claims.
	In practice, this data matching will almost certainly be done in England by the DSS's data matching service, which has the infrastructure and expertise to do so. It would thus be covered by the DSS Code of Practice on Data Matching, which has been endorsed by the Information Commissioner. Indeed, she wrote the foreword, in which she stated:
	"I am pleased to report that since welcoming the first edition a year ago I have received only a very few enquiries about the Department's data matching exercises. In other words, the code seems to be achieving two twin goals of setting out for DSS staff the standards that they must follow, and of explaining to benefit claimants the nature of the checks that are carried out and the safeguards".
	So there is praise and support from the Information Commissioner on the code that currently governs the situation.
	When one country decides to provide information to another, it does so on a voluntary basis. In so doing, it may wish to place restrictions on the use to which that information can be put. Our understanding with Ireland specifies that information about an individual which one authority transmits to another will be used exclusively for the purpose of administering social security legislation. As Members of the Committee can imagine, there are particularly sensitive issues around the uses to which information that passes between Northern Ireland and the Republic could be put. We are well aware of some of the complexities, as are Members of the Committee.
	For it to appear to the Secretary of State that suitable arrangements are in force to allow exchange of information, he must first satisfy himself that that is the case. I hope that, given this full answer--which I thought it important to place on the record--I have reassured the Committee that we are not about to hand over our social security records to Saddam Hussein. Therefore, I urge the noble Lord to withdraw his amendment.

Lord Astor of Hever: I thank the Minister for that full response. We feel that the two amendments merit such a response. As the Minister said, transnational social security fraud is a very serious problem. We on these Benches will do everything possible to help to stamp it out.
	I was grateful for the Minister's assurances on asylum seekers, and for the assurance that the Government will not enter into any arrangement with any country that does not have an adequate use for such information or a democratic form of government. I thank my noble friend Lady Fookes for her support. In the light of the Minister's helpful response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 66 not moved.]
	Clause 4 agreed to.
	Clause 5 agreed to.
	Clause 6 [Loss of benefit for commission of benefit offences]:
	[Amendment No. 67 not moved.]

Lord Goodhart: moved Amendment No. 68:
	Page 10, line 42, at end insert ("provided always that no such reduction shall exceed 10 per cent.").

Lord Goodhart: Members on these Benches regard this as an important amendment. During the clause stand part debate on Clause 6, I shall again emphasise that, as your Lordships already know, we are extremely concerned about using the reduction of benefit as a method of imposing punishment for misbehaviour.
	I wish that I could speak with the eloquence that my noble friend would have used if he had been here today. This subject is of great concern and raises questions about the fundamental nature of state means-tested benefits. The proposal is that there should be a reduction in certain benefits of 40 per cent. Evidence taken by the Delegated Powers and Deregulation Committee made it clear that there were certain--admittedly rather limited--circumstances in which that 40 per cent reduction could be applied twice over, which would lead to a reduction of 80 per cent. That could occur in the context of a refusal to attend a job interview under the rules relating to the jobseeker's allowance.
	Income support includes something that is perhaps a little more than a basic minimum standard of living. It does so even if the basic minimum is looked at in the short term. Obviously, income support includes an element that will enable people to clothe themselves. It is arguable that if benefit were withdrawn for a short period of no more than three months--that is the maximum period, under the Bill, during which benefit can be withdrawn--one could always defer one's need to buy clothes until the end of that period.
	There is no study or definition of what might be called the absolute minimum basic standard below which one would start to suffer really serious problems, such as malnutrition. The relevant figure is likely to be somewhat higher than that associated with the absolute basic minimum standard, and it is likely to be somewhat higher than 60 per cent of income support. Although we do not know the answer to certain questions, it appears that there is a real risk that reducing income support to only 60 per cent of the standard level will mean that one goes below that absolute basic minimum standard.
	The 10 per cent figure that is proposed in the amendment might not take one below that absolute basic minimum standard. If one goes below that standard, the benefit fraudster may suffer hardships that are damaging to his or her health. He or she may have standards of nutrition and of heating during cold weather, for example, that are less than those that he or she would have had in prison.
	An even more important consideration involves the fact that when the fraudster is the member of a household, the other members of the household will not get differential treatment. The fraudster will not be told by the rest of the family, "You can have a piece of bread without cheese while the rest of us have bread with cheese". There will be a common standard between all members of a household; their resources will be pooled. A hardship will therefore be imposed on the fraudster, which may be regarded as a legitimate form of punishment, and, inevitably, on the other members of the family, especially on children. That will apply even if, as is the case, the children's element in income support payments is not reduced. If the cut means that the family has to choose between the fraudster's cigarettes and the children's clothes, I am afraid that it is all too obvious who is likely to lose out.
	We are seriously concerned about the use, in any circumstances, of benefit reductions as a means of punishment, even over a relatively short period. We feel that any figure should be imposed only after it has plainly been justified by a study as a figure below which real long-term problems such as damage to health are likely to begin. On that basis, we are not satisfied that a 40 per cent reduction would be justifiable. We believe that a considerably lower figure is necessary.

Lord Higgins: This is the sort of amendment in relation to which the noble Earl, Lord Russell, would convey his view with eloquence. We are sorry that he is not with us and hope that he will soon recover and return to help us in our debates.
	The problem with the penalty--withdrawing benefit from someone who has committed benefit fraud--was spelt out by the noble Lord, Lord Goodhart; namely, that the relevant person may be in very limited circumstances, unless, of course, the fraud has been singularly successful. The amendment that the noble Lord moved will reduce the extent of the penalty to 10 per cent. I rather doubt whether that would make a significant difference one way or another. The problem is rather different.
	I have a question for the Minister about the clause. Subsection (3) states that,
	"the offender's entitlement for that period were reduced in such manner as may be prescribed".
	I am not clear about the word "manner" in line 42 on page 10. It is a rather odd word to use in that context. It might be preferable if the Bill stated that the entitlement would be reduced "by such an amount as may be prescribed". The phrase, "in such manner" is a little strange.
	The noble Lord referred to the problem of cigarettes. Some time ago, the then Policy Studies Institute carried out a survey which had a most extraordinary finding. People living absolutely on the limit as regards income support spend a very high percentage of their income support on cigarettes. The survey also showed the extent to which the Treasury gained as a result of that operation. There would be a real problem if such a sanction were imposed.
	The sanction is related to the approach that involves the ruling, "Two strikes and you're out". I understood from our earlier debate on local authorities that only 800 individuals were prosecuted last year. Presumably, a small proportion of those are second-time offenders. Perhaps that is not the case and they all are. Even so, the total is still only 800.
	I forget the precise paragraph in the excellent report of the noble Lord, Lord Grabiner, which deals with this issue. However, it raises the question of whether this type of penalty is appropriate. Either the offence is serious, in which case presumably a custodial sentence would be appropriate, or it is not serious and the consequences spelt out by the noble Lord, Lord Goodhart, would follow.
	That brings me finally to our earlier discussion about, for want of a less "jargony" expression, the light end and the heavy end of the market. The more I think about what the noble Baroness said earlier, the more doubtful I am about the distinction and the extent to which the Bill will be effective on the light and heavy ends of the market. However, I believe that the penalty set out in this clause is clearly directed at the light end of the market; that is, towards people who have somehow slid into fraud. It is not directed at the organised crime or collusive employer end of the market.
	Therefore, from that point of view, the penalty appears to be remarkably badly targeted. If we are to make a distinction between the light and heavy ends of the market, we need to consider what the appropriate penalties might be and whether an alternative penalty to that proposed in the clause might not be more appropriate.

Baroness Hollis of Heigham: Before the noble Lord sits down, perhaps I may ask what he has in mind.

Lord Higgins: I was intending to wait and see what the Minister might suggest. I believe that a genuine problem exists here. Clearly one can go for custodial sentences or whatever in relation to the heavy end of the market. However, if the case appears to be at the light end of the market but none the less the Government carry out an investigation and find that fraud is involved, I am not sure whether we should consider a penalty which is more closely related to the criminal side of the operation.
	I agree that a real problem has been outlined which we need to consider. I am unable to propose an alternative off the top of my head, but the matter raises all the problems which the noble Lord, Lord Goodhart, spelt out.

Baroness Crawley: From this side of the House, I, too, wish the noble Earl, Lord Russell, a speedy recovery from his flu. However, we do not wish his amendment well for the single and simple reason that the effectiveness of the proposed sanctions in the Bill will be unacceptably diluted by it. The sanction of a 40 per cent reduction in income support and JSA for two-time offenders needs to be robust in order truly to tackle the fraud perpetrated. We are talking about single-minded, incessant offenders.
	The sanction also needs to be robust in order to act as a proper deterrent. In that regard, I believe that the issue of numbers raised by the noble Lord, Lord Higgins, is important. In a sense, it is not so much the precise scale of the number of offenders that matters as the ability to reduce that number and ensure that a sufficiently robust sanction is in place to act as a deterrent.
	Yet, although the sanctions are robust--there is no doubt about that--they are proposed with qualifications. Those qualifications are included so that the sanctions do not constitute hardship in the sense referred to by the noble Lord, Lord Goodhart, with regard to levels of survival, starvation and so on. We are not talking about that. We are talking about a robust deterrent which gives a clear signal to those who might be tempted to go down that road. However, it should also ensure that two-time offenders do not suffer unacceptable hardship.

Baroness Hollis of Heigham: I, too, regret that the noble Lord, Lord Higgins, should be absent for such a bad reason as flu--I am sorry; Freud says that one never makes a mistake--that the noble Earl, Lord Russell, is absent due to flu. Clearly it is the noble Lord, Lord Higgins, who is giving me the hard time and that is why his name came to mind. I do not wish him to catch flu. Our proceedings would not be the same in his absence, despite the very able support which he receives from his noble friend Lord Astor.
	Before I respond to the amendment, perhaps I may pick up one point. The noble Lord, Lord Higgins, asked me about the weight of "in such manner". "Manner" covers different amounts: it may be 40 or 20 per cent, depending on the personal allowances of the claimant. Those can vary according to the claimant's age, for example, or the age of his children, and so on. That is why the word "manner" is included in the Bill rather than the word "amount".
	I return to the substance of the amendments. They seek to limit to 10 per cent of a single person's allowance the amount by which income support or JSA could be reduced by the imposition of a fraud sanction. As my noble friend Lady Crawley said, the intention of the two-strikes clause is to deter the persistent, hard core, repeated benefit offender from re-offending. We are tackling that problem by reducing benefit or denying such people access to benefit.
	It is not right that people should expect to remain on benefit as though nothing has happened when, according to the court, they have abused the system not once but twice. I suspect that most people would be surprised to learn that, having defrauded the system at least twice as established in the courts of law, offenders continue to draw benefit.
	It may be helpful if I provide some statistics. The best information that I have is that we expect approximately 10,000 prosecutions of people who have committed one offence. However, the figure would be approximately 500 in relation to those who have committed two offences. That is the scale of the problem which we are discussing.
	The noble Lord, Lord Goodhart, asked whether a double sanction would apply in some cases; for example, where someone was claiming JSA, was actively seeking work and was sanctioned. Such situations are extraordinarily rare--we believe that only 10 cases a year may arise. In such a situation, a person could free himself of the 40 per cent reduction whenever he wished by becoming available for work. In other words, the second 40 per cent sanction is entirely in the hands of the person who is defrauding the benefits system. If he wishes, he can repair the situation immediately. Therefore, I do not accept the weight of the concern expressed by the noble Lord, Lord Goodhart.
	As my noble friend Lady Crawley said, for the sanction to be meaningful, it must be seen to be proportionate. The current provisions for hardship payments and benefit reductions have been in existence for many years and have also been introduced more recently for those who fail to comply with the ONE work-focused interviews, the CSA and so on. I have given an undertaking that the hardship payments which are available to those who are sanctioned but are without adequate other means will maintain parity with these levels of sanction.
	Currently, the sanction is a reduction of 40 per cent of the single person's allowance, or 20 per cent if a member of the household is either pregnant or seriously ill. I believe that assurance was sought with regard to the delegated power, and we shall ensure that that situation is made clear.
	The provisions relating to the 40 and 20 per cent reductions on JSA have been tried and tested. We believe that they provide a sensible balance between protecting vulnerable people and their dependants while remaining meaningful and effective. A member of a family may defraud the system and it may be established twice by the courts that he has done so. If that person then expects to maintain his standard of living at the expense of the children, I agree that it will be difficult to alter that situation from the outside.
	Such incidents already occur in families which many of us may regard as, to use a technical term, dysfunctional. One member of a family may inappropriately apportion to himself an unfair degree of benefit. Such problems arise when one is dealing with a household-related benefit. I accept that. There is no way to overcome that unless the person who has committed the fraud is ejected from the household, and the household becomes a lone parent household. We think that reducing the sanction to just 10 per cent would be inadequate. The noble Lord, Lord Higgins, said he did not think that that would make much difference.
	To put the matter in perspective, I should like to give some examples that have been worked out for me. The first is of a lone parent with two children, receiving housing benefit and council tax benefit worth £70 a week on top of income support. If she had the full sanction of 40 per cent, possibly because she was cohabiting, or there were undeclared earnings that we had not been aware of, her current income of £191.30 would fall to £170.42, a cut of about £21. For a couple with two children, a cut of approximately £21 would also apply. In the case of a seriously ill or pregnant lone parent with one child, with a total benefit income, unsanctioned, including housing benefit and council tax benefit of £186.95, a sanction of 20 per cent, given that she was seriously ill or pregnant, would bring her income down to £176.
	The sanctions are meant to be a deterrent. They are not so harsh that they would put people into serious destitution. I believe that we have struck the right balance. We have gained experience from other areas of the DSS where these sanctions apply, and where it has been accepted that the balance is about right.
	The noble Lord, Lord Higgins, has certain worries, which I can understand, but perhaps he can suggest a sanction that would not bear on other members of the household but only the person committing the offence. That is a real dilemma. The scope of the sanction, which tends to be between £10 and £30 off benefits, is not so unreasonable that it would generate real hardship. But it would have the deterrent effect we seek. In the light of those remarks, I hope that the noble Lord, Lord Goodhart, will feel able to withdraw the amendment.

Lord Higgins: The people we are talking about here, the "two strikes and you are out" group, are neither light nor heavy; they are in between. They are clearly not trivial, but they are also not engaged in organised crime or anything of that kind.
	I do not know that it is appropriate for the Opposition Benches to suggest alternative penalties, but has any consideration been given to the possibility of imposing community service, to be done in the evenings for example?

Baroness Hollis of Heigham: The magistrates' courts already have the power to impose community service or imprisonment.
	This is an offence against the benefit, not once, but twice. People will know when they first draw that benefit that the information they give will be checked, and that there will be penalties if they do not give the correct information. It would mean that somebody had not learnt their lesson from the first case before the magistrates' court and had gone on to repeat the offence. We are talking about quite small numbers of 350 to 500. I am quite willing to look at the question of community service. However, I feel that if people have twice deliberately defrauded the system established by the courts, then one should look at the benefit that is the subject of the fraud. I will, however, reflect on the situation. I suspect that quite a high proportion of offences will be committed by single people, and that therefore other members of the household will not bear part of the cost.

Lord Grabiner: I dealt with the point raised by the noble Lord, Lord Higgins, in paragraph 7.37. I am not sure that this solution will be remotely acceptable to the noble Lord, Lord Goodhart. There is a division of view on this point on the opposite Benches.
	In order for a court to impose a sentence of community service, it has to be satisfied that the case would otherwise appropriately be dealt with by a prison sentence. It is only in those circumstances, in a suitable case, having obtained the consent of the defendant, that a court can impose a sentence of community service. That is an alternative possibility in paragraph 7.37 to the primary proposal, which is the "two strikes and you are out" point.
	As a matter of principle, under the current rules for JSA, even if the conditions for entitlement are met, limited payments can be withheld for a specified period if jobseekers unreasonably cause or prolong their unemployment. For example, if they refuse to take a job without good reason, they can be sanctioned. The sanction period under the existing arrangements, as I am sure the noble Lord knows, is between one and 26 weeks. As a matter of principle, the point we are discussing is something that is already well established under our social security law.
	There is a very important distinction between the jobseeker example and the case we are now discussing where there have been two previous convictions for benefit offences in the criminal court. I would be interested to hear the noble Lord's reaction to that point. I appreciate, without wishing to put the answer in his mouth, that he would say that those rules were also wrong in principle.

Lord Goodhart: I am grateful to the noble Lord, Lord Grabiner, for his intervention. I can see some grounds for distinction between JSA here and income support. In the case of income support, what you are getting is, by definition at this stage, what you are entitled to get, and that is reduced because of something you have done in the past.
	The Minister suggested that a reduction in the household income from £191 a week to £170 a week is not a damaging reduction. I should like to say that for a family that is very much on the financial borderline, that kind of reduction, prolonged for even a period of 13 weeks, could still be devastating. I continue to believe that withdrawal of benefit in these circumstances, on the basis of "two strikes and you are out", is a deeply unsatisfactory form of punishment.

Baroness Hollis of Heigham: I do not suggest for a moment that withdrawal of £20 for a lone parent, with a couple of children, would not generate hardship; of course, it would generate a degree of hardship. Equally, depending on the psychology one uses to approach this matter, a lone person would know, in advance of her first offence, that if she gives false information she can be prosecuted; yet she has been prosecuted and found guilty and continues. Might it be that because it would generate hardship, she might, on reflection, be deterred from committing a second benefit offence? We are seeking to prevent the offence occurring rather than punishing people after the offence because they have taken the matter so lightly.

Lord Goodhart: The people who become involved in that kind of situation are very often inadequate people who cannot break their own cycle of misbehaviour.

Baroness Hollis of Heigham: We are talking about deliberate, knowing fraud.

Lord Goodhart: I understand that. This concerns people who lie because they believe it is the easy way out and an easy way in which to acquire more money. However, they are unable to see the long-term consequences. Of course, the hardship falls not just on them, but also on their children, for the reasons that I explained. That is why we believe that this is a deeply unsatisfactory form of penalty. Of course, it is not my intention to divide the Committee now. I shall consult my noble friend, and I suspect that we shall return to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 69 not moved.]

Lord Higgins: moved Amendment No. 70:
	Page 11, line 27, at end insert--
	("Likewise any third party either informed of the restriction or contacted as part of the investigatory process shall be notified of the quashing of the conviction.").

Lord Higgins: The amendment concerns a part of Clause 4 which is concerned with putting matters right if they have gone wrong. It suggests that if there has been a mistake, any,
	"payments and other adjustments shall be made as ... if no restriction had been imposed by or under this section that could not have been imposed if the conviction had not taken place".
	We suggest that any third party who has been informed of the restriction or contacted as part of the investigatory process shall be notified that the conviction has been quashed. If something has gone wrong, we are anxious to ensure that the status quo shall be established. Clearly, in a number of cases there are problems, as was said earlier, not least in local government where the situation is not satisfactory. It seems to us that we should make provision to ensure that a situation of the kind that I have described is put right if it arises. I beg to move.

Baroness Hollis of Heigham: This amendment would require the department to inform any third party who had been contacted during the course of a fraud investigation that lead to a second conviction, or who had been notified of the imposition of a sanction, that the conviction had been subsequently quashed on appeal. The intention behind the clause is to ensure that any money deducted from a claimant's benefit, as a result of a fraud sanction, is repaid in the event of one of the convictions being squashed.

Lord Higgins: I think the noble Baroness means "quashed".

Baroness Hollis of Heigham: Yes. That comes from singing the previous night. Whenever we in the parliamentary choir sing the "Excelsis" in Faure's Requiem, our "s"s come in the wrong places. One can tell Members of your Lordships' House who sing in the choir by the fact that they have an obsession with where the letter "s" goes.
	The intention behind the clause is to ensure that any money deducted from a claimant's benefit, as a result of fraud sanction, is repaid in the event of one of the convictions being quashed. That is only right and the same principle applies to other benefit sanctions.
	It is not, and never has been, normal practice to inform third parties either of the result of an investigation in which they may have been involved, or to notify them if a sanction has been imposed. To do so may well be contrary to the principles of the 1998 Data Protection Act. That is not to say that such information will never be passed to third parties. There will, for example, be occasions when housing benefit has been sanctioned and the local authority needs to be notified that benefit should be repaid.
	Of course, we would tell a local authority in situations such as those, as we already do, so that is not needed on the face of the Bill. This amendment would not add anything to the Bill; it would impose additional burdens on the department and it may have serious implications under the Data Protection Act and Human Rights Act. In the light of that explanation I hope that the noble Lord will feel able to withdraw his amendment.

Lord Higgins: I do not understand why. Why is it contrary to the Data Protection Act or the Human Rights Act to tell those who have heard about it that a conviction has been quashed? I have difficulty in understanding why that affects the Human Rights Act. I can see that it may affect that Act the other way around, but I do not understand why there is a problem in relation to this amendment. It merely proposes that the department should ensure that the matter is put right if people take an adverse view of an individual for the wrong reasons.

Baroness Hollis of Heigham: My understanding is that third parties may not know that a person has gone through the courts, that the matter has been officially upheld and that it has been quashed on appeal. All of that would be the divulging of information to third parties in terms of the circumstances, when they may not have known the original information. I am assured that that would involve a breach of the Data Protection Act as supervised by the Information Commissioner.

Lord Higgins: I am sorry to persist when the noble Baroness has been so helpful on other matters. Under the words of the amendment, the third parties have been informed of the restriction or have been contacted as part of the investigatory process in relation to the individual concerned so I do not believe that putting it right would be an infringement.

Baroness Hollis of Heigham: I was reading the amendment of the noble Lord which states:
	"Likewise any third party either informed of the restriction or contacted as part of the investigatory process".
	The noble Lord is quite right about the first part of the amendment, but "contacted as part of the investigatory process" would mean that they would need to have been notified that the person had gone to court, that he had been convicted and that subsequently the conviction had been quashed, or they may have no such information. As I just said, that is my understanding of where we could run foul of the Data Protection Act.

Lord Higgins: I understand that the second part of the amendment may be faulty in that respect. If need be, we could deal with that on Report. But if a third party has been informed of a restriction--namely, that an individual has had her benefit restricted because she had been fraudulent twice--and to say to the person who was informed of the restriction that it was unjustified, seems to me to be reasonable.

Baroness Hollis of Heigham: Perhaps the noble Lord can help me. What body or person does he have in mind that would be informed on the first point, whereupon he would need further information in order for the first information not to stand, apart from local authorities? I have already made the position clear in relation to local authorities. They would be notified.

Lord Higgins: The main problem is with local authorities. If they are to be involved, that is fine. That is where I have concerns.

Baroness Hollis of Heigham: I am puzzled. About half of my reply related to local authorities. I am happy to restate what I said. There will be occasions, for example, when housing benefit has been sanctioned and the local authority needs to be notified that benefits should be repaid. Of course, in situations such as those, we shall tell a local authority. That is nothing new as we do that already as a matter of course if benefit has been suspended or withdrawn for any other reason. So that does not need to be put on the face of the Bill. It is custom and practice. I believed I had made that clear in my earlier remarks.

Lord Higgins: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 71 to 73 not moved.]

Lord Goodhart: moved Amendment No. 74:
	Page 12, line 22, leave out from second ("references") to ("to") in line 24.

Lord Goodhart: Amendment No. 74 seeks to rule out a case where a conditional discharge has been imposed as regards one of the two benefit offences for the purposes of Clause 6. It may be that it is not drafted entirely correctly because I suppose that it would extend to a case where a condition had not been satisfied because a second offence had been committed within the conditional period.
	A conditional discharge is imposed for a relatively trivial offence or an offence in respect of which the court thinks it is not necessary or desirable to impose a sentence having an immediate effect, but the defendant is given a discharge contingent on not committing a further offence within a specified period. If that specified period elapses, the conditional discharge ceases as a form of punishment and the slate is wiped clean. It seems to me inappropriate that that should be one of the strikes for the purposes of the "two strikes and you are out" legislation.

Lord Astor of Hever: I rise to speak to Amendment No. 75, which makes it clear that if a person in Scotland receives an absolute discharge from the court or is placed on probation, he is not regarded as having been convicted. This amendment seeks to ensure, therefore, that for the purposes of this Bill a person placed on probation or granted an absolute discharge will not be treated as havingbeen convicted of a benefits offence. In Scotland, an absolute discharge or probation order does not in law amount to a previous conviction. It is necessary to make that distinction. If a court deems it appropriate to dispose of the case in that manner, it would not seem appropriate further to penalise the accused person by the deduction or removal of benefit.

Baroness Hollis of Heigham: I shall be extremely brief on both amendments, which relate to the question of what constitutes a conviction for the purposes of the loss of benefit provisions. In many respects, the type of sentence imposed by the court is not relevant to these provisions. What matters is whether or not the court has found a person guilty of benefit fraud, not what follows on from that. However, both amendments raise technical issues with regard to the question of sentencing which I should like further to consider and return to on Report. On the basis of that undertaking, I hope that the noble Lords will feel able to withdraw their amendments.

Lord Goodhart: In the light of the Minister's reply, which I welcome, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 75 not moved.]
	On Question, Whether Clause 6 shall stand part of the Bill?

Lord Goodhart: Most of what I had intended to say has already been said in relation to Amendments Nos. 68 and 69. However, there is a difference. By removing Clause 6 altogether from the Bill, one would achieve the objective of preventing the removal of benefits from being used in any circumstances as a punishment. Clause 6 therefore goes somewhat further than Amendments Nos. 68 and 69, which would reduce the level of punishment from 40 to 10 per cent.
	I make it clear that the real objective of those on these Benches is to remove altogether the reduction in benefit as a penalty for previous convictions for benefit fraud. At Second Reading my noble friend Lord Russell said:
	"But in my scale of consequences, disentitlement is arguably a more severe punishment than imprisonment. I can see a strong case for imprisonment. But leaving people with no visible means of subsistence is something which the Minister knows, and has known for a long time, gives me profound misgivings".--[Official Report, 16/1/01; col. 1055.]

Baroness Hollis of Heigham: I thought at the time that it was very odd to suggest that prison is worse than receiving a 20 or 40 per cent reduction of benefit in terms of sums of £20 to £30 on an income of £200. It is incongruous to suggest that deducting up to £30 from £200 is worse than sending someone to prison, especially in cases in which children are involved. I am not sure that the noble Lord, Lord Goodhart, really believes that. I invite him to say whether he identifies with his noble friend's statement.

Lord Goodhart: A reduction in benefit could in some circumstances be a worse penalty for other members of the family. I can understand that generally for a fraudster it would not be. For other members of the family, depending on the family circumstances, it could be. Therefore, I am not prepared to disassociate myself from my noble friend on that particular issue.
	Our view is that Clause 6 should not stand part of the Bill. We do not raise this objection as merely a peg on which to hang a debate. We genuinely believe that Clause 6 should not stand part. I shall not force the question to a Division today, but we may return on Report with an amendment to omit Clause 6.

Baroness Hollis of Heigham: I understand that the noble Lord's argument is based on family budget unit material and the like, and I accept that that is a powerful argument. I am anxious not to concentrate too much on the distinction between hard and soft and the weight to be attached to that distinction. However, to assist the Committee's understanding of our proposal, I should like to read into the record one or two examples of benefit fraud.
	One claimant in receipt of incapacity benefit was found to be working as a disc jockey. He had fraudulently claimed a total of almost £9,000 before being caught and successfully prosecuted. Within weeks of being sentenced, he was found to be working while again in receipt of benefit. He was again successfully prosecuted, but not before he had run up a further overpayment of £500.
	Another claimant was prosecuted when he was found to be working while claiming income support. He was convicted and received a conditional discharge for one year. Fifteen months later, he was again successfully prosecuted for stealing a relative's child benefit giro cheques. That still did not stop him. Within two years he again appeared in court for attempting to obtain the jobseeker's allowance, to which he was not entitled.
	Another claimant was prosecuted and convicted for two offences of girocheque fraud. Some months later, he was prosecuted a second time for similar offences. That was not the end of the matter. He was later successfully prosecuted a third time for working while in receipt of incapacity benefit. On that occasion he had amassed an overpayment of almost £1,000.
	There are many more examples of others who have not slipped into the system by error. The examples that I have given involved the commission of deliberate, repeated fraud. The public cannot have faith in a social security system that provides money to people who deliberately, wilfully and persistently defraud that system. I believe that that would bring the system into disrepute. The benefit sanctions proposed are appropriate to the level of fraud that we are discussing. As a result, I hope that the noble Lord will allow this clause to stand part of the Bill.

Clause 6 agreed to.
	Clauses 7 and 8 agreed to.
	Clause 9 [Powers to supplement and mitigate loss of benefit provisions]:
	[Amendment No. 76 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 77:
	Page 15, line 13, leave out paragraph (a).

Baroness Hollis of Heigham: My moment has come! In moving this amendment, I speak also to the amendments grouped with it in my name.
	The Committee will be aware of the Report of the Select Committee on Delegated Powers and Deregulation. The committee has been painstaking in its scrutiny of the Bill, for which I am grateful. I hope that the noble Lord, Lord Goodhart, will convey my thanks and appreciation to the committee, of which he is such a striking and senior member.
	The committee in its report made a number of recommendations, one of which concerns the enabling power at Clause 9(1)(a). Paragraph (a) provides a power to add by regulations to the list of benefits which are sanctionable under the loss of benefit provisions at Clauses 6 to 12. The committee was of the opinion that that type of change was sufficiently important to warrant primary legislation. I can reassure Members of the Committee that the Government have no intention of making sanctionable any of the benefits currently exempt from the sanction by virtue of Clause 6(8). Paragraph (a) of Clause 9(1) was included in the Bill to provide future proofing against any change to the structure of the benefits system; for example, the creation of a new benefit.
	We take seriously the concerns of the Delegated Powers and Deregulation Committee and after consideration we agree with its recommendation. Therefore, Amendment No. 77 removes paragraph (a) from the Bill. As a consequence, any future addition to the list of sanctionable benefits will require primary legislation. Amendment No. 78 makes a consequential amendment to subsection (4) of Clause 9 because the removal of subsection (1)(a) makes it redundant. Clause 10(3)(a)(i) is also made redundant, and is deleted by Amendment No. 80.
	I hope that the Committee will welcome the amendments, which follow the recommendations of the Delegated Powers and Deregulation Committee. I beg to move.

Lord Astor of Hever: I am grateful to the Minister for explaining the amendments. The Government have listened to the advice given in the fifth report of the Delegated Powers and Deregulation Committee, in particular the comments of the noble Lord, Lord Goodhart. We welcome the amendments.

Lord Goodhart: I, too, welcome the amendments, as do my colleagues on these Benches--absent though most of them are! The Government have listened to what has been said. Future proofing is unnecessary because any new benefit will be introduced by primary legislation. That will be the opportunity to add it to the list of benefits which are not sanctionable. I am grateful to the Minister for tabling these amendments.

On Question, amendment agreed to.

Baroness Hollis of Heigham: moved Amendment No. 78:
	Page 15, line 29, leave out subsection (4).
	On Question, amendment agreed to.
	Clause 9, as amended, agreed to.
	Clause 10 [Loss of benefit regulations]:
	[Amendment No. 79 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 80:
	Page 15, leave out lines 42 and 43.
	On Question, amendment agreed to.
	Clause 10, as amended, agreed to.

Lord Goodhart: moved Amendment No. 81:
	After Clause 10, insert the following new clause--
	:TITLE3:ANNUAL REPORT BY SECRETARY OF STATE
	(" .--(1) The Secretary of State must make an annual report to Parliament on the effects of reduction or withdrawal of benefit under the process contained in section 6.
	(2) Such report shall include information on--
	(a) the means of subsistence available to those so sanctioned;
	(b) the incidence of homelessness among those so sanctioned;
	(c) the incidence of imprisonment among those so sanctioned; and
	(d) the death rate among those so sanctioned.").

Lord Goodhart: For a long time and in a number of different situations, my noble friend Lord Russell has pressed for more information about the effects of benefit withdrawal. As yet, he and I have had no such information and are not satisfied that proper and adequate research has been done on the effects of benefit withdrawal in terms of increased crime, homelessness, health and death. We believe that if research were done--admittedly, the sample is small--the withdrawal of benefit would show significant adverse results.
	In those circumstances, we believe that if benefit withdrawal is included as a penalty under the Bill, the fullest information should be provided about the consequences on those who suffer it. I beg to move.

Baroness Hollis of Heigham: I was a little surprised to see the amendment tabled in this way, given that the noble Earl, Lord Russell, raised it fairly in the closing part of his Second Reading speech. Although I did not have time to address the matter as fully as I would wish, I wrote to the noble Earl on 25th January giving the Government's view. I had hoped that that would meet his concern. I do not know whether there is anything in the letter with which the noble Lord, Lord Goodhart, is uncomfortable or wants to challenge.
	I have assured the noble Earl that we intend to monitor the effects of the sanction, as we would monitor any new social security policy, particularly one designed to combat fraud. I have specifically given an undertaking that as well as looking at the sanction's effectiveness as a deterrent, we shall also monitor the economic impact it has on individuals' lives, including the adequacy and accessibility of hardship payments. I have also given the noble Earl my undertaking that monitoring will take particular account of specific groups of claimants, including those recently discharged from prison.
	We constantly monitor the effect of sanctions. We have done so for labour market sanctions and we have agreed to do so for the community sentence sanction introduced in the previous social security Bill. However, we need to bear in mind that the number of people who may be affected is considerably smaller under in this Bill than for either of those sanction regimes. We do not envisage the fraud sanctions being applied to more than 500 people in any year. Those without other means of support will be able to access hardship payments after two weeks at the longest.
	Obviously, the effects of sanctions were meant to be experienced, but, equally, while they might generate a degree of hardship, a 20 per cent cut in a person's income does not cause "destitution". I would not accept words such as that. The people about whom the noble Lord, Lord Goodhart, and the noble Earl, Lord Russell, are concerned will experience a two-week delay before a hardship payment is made. I find it difficult to understand how we can conduct meaningful research into the relationship between two weeks without benefit and such significant life events as homelessness, imprisonment or death.
	I wondered yesterday how, if I were asked to carry out such a research project, I would go about it. I find it almost impossible to conceive. It would depend almost entirely on the alternative resources people might have; the family support available to them; their usual diet; their standards of health; their expenditure patterns; how much they drank; how much they smoked; whether they were on drugs; what they spent on travel; and how much any or all of that was genuinely discretionary and could therefore be used to offset their penalty. It would also depend on the quality of their existing housing, given that housing benefit was not normally removed.
	One would have to know the answers to all those questions and weigh them in a sample of, at most, 300 to 500 people going without benefit for two weeks. The group going without such benefit might be even smaller. In terms of effects on health, it is hard to know how to relate imprisonment and death to two weeks without benefit without knowing a claimant's state of health beforehand; what other means of support he had; what his eating and drinking patterns were; and so forth. One could not do it. Research based on a fortnight's withdrawal of benefit would not be plausible and meaningful.
	Importantly, we shall monitor the effects of the sanction in order to see whether it deters people. We hope that it will. I ask noble Lords to temper their expectations of what can be delivered given the small size of the group. It will be hard to identify statistically valid information about trends. As the measure is designed to act as a deterrent more than anything else, the indication of success, as my noble friend said earlier, will be a fall in the number of people to whom it may be applied. That would be a more meaningful statistic.
	I could argue at length about the nature of social policy research but, as envisaged, I do not see how research on the effect of withdrawal for a period of two weeks of hardship payments, with some degree of a cut in benefit, can produce detailed information which would be meaningful and academically respectable. One cannot connect two weeks' loss of benefit with factors such as imprisonment and death. It is just not possible. I realise that normally I would be arguing this matter with the noble Earl, Lord Russell, who is happy to cover the field of social research. If the DSS were kind enough to offer me such a task I would suggest that it reviewed its thinking on the matter.

Lord Goodhart: I do not entirely agree with the Minister about the difficulties of statistical analysis in this matter. I accept that one has to look into the circumstances of the people concerned to find out why they have died, been imprisoned or whatever. It is not very difficult simply to look at the figures. One may find that people entitled to hardship payments are not claiming them for some reason. If one found that the number of people on whom benefit withdrawal has been imposed was at a statistically higher rate than through death or imprisonment or loss of home, one would certainly want to look in more detail at the causation. If one finds that there is no significant difference, then one does not take the further steps. If there is a significant difference, one then looks at a cross-section of individual cases to see why there is a much higher rate. That seems to me to be both legitimate and possible.

Baroness Hollis of Heigham: I was going to press the noble Lord on this issue. It may be that 350 cases a year suffer that benefit penalty. Let us suppose that, compared with another control group, the difference was one death. How would the noble Lord be able to attribute that? It would not be statistically significant. There would be the healthy population consideration, age for age; educational standards or the lack of them. How would one do it? If one were dealing with the minimum statistical sample of 303, one would have to have figures of the order of 20 plus for it to begin to be statistically significant to the degree that the noble Lord suggests. The information could not be arrived at in this way. That is not to say that the department would not be tracking and monitoring what happens, which is different. But with the sample size given, a research-based project would not permit robust findings.

Lord Goodhart: I do not believe that 300 plus is statistically a very small sample. A great deal of such work is done on much smaller samples. I accept that if the difference is one death, that is not significant and no further research would be carried out. But if one finds there are, say, 20 deaths, that would be an astonishingly high figure. Even if the figure were 10, I believe that one should investigate what is happening in more detail.
	There is no point in carrying on the argument further at this time of the evening. I beg leave to withdraw the amendment

Amendment, by leave, withdrawn.
	Clause 11 agreed to.
	Clause 12 [Interpretation of sections 6 to 11]:
	[Amendment No.82 not moved.]
	Clause 12 agreed to.
	Clause 13 agreed to.
	Clause 14 [Colluding employers]:
	[Amendments Nos. 83 to 85 not moved.]

Baroness Noakes: moved Amendment No.86:
	Page 18, line 20, after ("conduct") insert--
	("(ca) stating that he may within 30 days of the date of the written notice make representations to the Secretary of State or authority as to why he believes that the provisions of subsection (1) or (2) are not met;").

Baroness Noakes: In moving this amendment I shall also speak to Amendment No. 87. Amendment No. 86 also stands in the name of the noble Earl, Lord Russell. I tried to explain at Second Reading that my underlying concern was to ensure that the scales are not tipped too far against employers, recognising that the provisions of Clause 14 will bear most heavily on the small business sector.
	I am emphatically not against the main thrust of the clause, which offers penalties as a cost-effective solution to warning off real offenders. I am certainly not against dealing properly with any offenders. As I said when we were discussing Amendments Nos. 53 and 64, the concern is that what appears to be clear-cut to an official may not appear so to others. We can point to examples in other parts of government administration where that is the case. I cited the Inland Revenue and Customs and Excise.
	The concern is that without some kind of oversight of procedures small employers may be made the offer of a penalty, which amounts to little more than "Pay-up or else". The "or else" is that if one does not pay one goes to court, which is expensive and time-consuming. As regards small businesses, it takes the eye off the ball in running such businesses.
	Amendment No. 86 seeks to add another requirement to the notice procedure set out in Clause 14 to give the allegedly colluding employer, in addition to the details of the alleged conduct and penalty offer, 30 days in which to make his case as to why he is "not guilty". This extra procedure would allow the smaller employer the opportunity to make his case.
	Amendment No. 87 provides that the Secretary of State shall consider those amendments and either withdraw the provision or re-issue it. It is no more onerous than that. There is 30 days for the alleged colluding employer to state his case, but the other 30-day period does not run from that. The provision includes a safety valve against the possibility of genuine mistake or excessive zeal by officials. I put this amendment forward as one possible solution to the problem which I outlined previously in the hope that the Minister will provide some thoughts on how there can be some additional protection in particular as regards the code of practice about which she spoke earlier and Clauses 1 and 2 and not as regards Clause 14. There are no other sources to which we can turn to see what protection might be offered to those affected by what is proposed in Clause 14. I beg to move.

Lord Goodhart: It is right that someone who receives a notice of this kind should have the opportunity to reply to it and explain why it does not apply and should not be expected to pay a penalty in lieu of prosecution. I await with interest what the Minister has to say about the intended safeguard to ensure that someone who receives such a notice is entitled to challenge it.

Lord Higgins: I support my noble friend Lady Noakes. A safeguard of this kind seems appropriate. We are in a rather strange situation where people may pay up rather than go to court, even though they have a reasonable basis on which to believe that they have not been justifiably accused but find it an easier way out of a situation and less time-consuming.

Baroness Hollis of Heigham: I hope that my answer addresses those concerns; if not, the Committee will wish to return to the issue. The purpose of Clause 14 is to streamline the sometimes cumbersome, and always expensive, process of prosecuting collusive employers. It would allow the department and local authorities to target limited prosecution resources at the most serious cases and deal with the less serious by administering a swift civil penalty, which has been welcomed by the relevant business organisations.
	However, it is implicit in the provision that before making a penalty offer the department or local authority must first decide that there is a case to be answered in the courts. They could not form such a view without first properly investigating the case and interviewing the person under caution. These procedures comply with the PACE regulations which are in place to protect alleged offenders by ensuring that investigations are conducted appropriately and that the case is based on admissible evidence. Any mitigating factors which would make it inappropriate to consider a penalty would already have been taken into account; for example, where the employer suffered ill health and the threat of a penalty might worsen that condition.
	No matter how well intentioned, these amendments would have the effect of adding an extra layer of bureaucracy to the scheme and could conceivably prevent cases going to court. The amendment gives the employer the right to a 30-day period during which he could ask to have the validity of evidence rechecked. If that was exercised and evidence was still deemed suitable the department would have to go through the process of offering him a penalty for the second time. The employer would get a second written notice stating that he might be offered a penalty. If he agreed to the penalty, he would have a 28-day cooling-off period (which is already built into the system), at the end of which he could still refuse the penalty and opt to go to court.
	That process would give a collusive employer a very extended right to delay proceedings and prevent the case going to court at all. At worst, taking account of the time taken to recheck evidence and administer an administrative penalty for the second time, including associated notifications and interviews, there might be a delay of about three months before a case could be brought to court. Such a delay might activate a time bar, which could put a case beyond the period for which a summary prosecution could be brought.
	The Social Security Administration Act 1992 provides that proceedings for an offence under that legislation must start within three months of the completion of evidence gathering, or within 12 months of the commission of the offence, whichever period last expired. In those circumstances, the employer could be prosecuted for only a more serious offence which allowed a longer period before a prosecution had to be brought. Such prosecutions would potentially carry a higher penalty.
	Cases of collusion in benefit fraud are complex and, consequently, very labour intensive. Collusive employers often use the power that derives from their position in an organisation to distance themselves from the fraud. This kind of offence is, therefore, difficult to prove and takes up a large amount of staff time. The amendment could unnecessarily add to the amount of time already spent on an individual case, as there is a high risk that some employers would use it simply as a delaying tactic and come out of time altogether.
	The substantive point on which I seek to give reassurance, particularly to the noble Baroness, Lady Noakes, is that we already have sufficient arrangements in place to safeguard employers. The existing penalty in respect of claimants provides a precedent and many details about how safeguards would work in practice are already established. There is a 28-day cooling-off period. An employer who feels that he has been "bullied" into accepting a penalty, or that it is based on insubstantial evidence, but none the less believes that it is the easier option, would be able to use the 28-day period to put his grievance to the fraud investigator's manager as senior DSS officer to reconsider the case. If, for example, an employer felt that he had made a statement under duress, or that evidence had been fabricated, it would be open to him to make a formal complaint against the official or officials concerned. There is a robust and well established mechanism to handle any such complaint. In that case, any further action would be held in abeyance until the complaint had been fully considered.
	Moreover, the department and local authorities are bound by Crown Prosecution Service guidance. This already places a constant duty to review evidence and ensure that it is in the public interest to prosecute. Even if the employer did not put grievances to the department until the 28th day of the cooling-off period, existing procedures would ensure that the case was checked before a penalty was administered or the case was brought to court. It is worth remembering that the employers concerned would know whether they had acted fraudulently and they should accept a penalty; they would have that choice.
	We intend that decisions on whether it is appropriate to offer a penalty should be taken not by the fraud investigator but by someone higher in the chain of command--the noble Baroness expressed concern about that on the previous occasion--following detailed and explicit guidance. The guidance would make clear that the penalty should be offered only as an alternative to instigating criminal proceedings. During the implementation period the chief investigating officer and the department's lawyers will institute a system to check a random sample of cases in which a penalty is to be offered. I hope that that mechanism provides an assurance that administrative penalties are offered in appropriate circumstances according to policy guidance. In light of that fairly full explanation, I hope that the noble Baroness is able to withdraw the amendment.

Baroness Noakes: Perhaps I may ask one question about the procedure explained by the Minister. I believe that the noble Baroness said that during the 28-day cooling-off period the person to whom the penalty had been offered could approach a grievance manager. Would that procedure be drawn to the individual's attention at the time the notice was issued? Would the person concerned be aware of it?

Baroness Hollis of Heigham: He or she would. The noble Baroness is absolutely right to raise the issue.

Baroness Noakes: In the light of that response, I should like to reflect further on the matter. However, the response addresses many of my concerns in tabling the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 87 not moved.]

Lord Higgins: moved Amendment No. 88:
	Page 18, line 40, after ("subsection,") insert ("not less than").

Lord Higgins: In moving Amendment No. 88, I should like to speak also to Amendments Nos. 89, 90, 91 and 92, and to the Question that Clause 14 stand part. Much of the Bill that we have debated so far results from the excellent report by the noble Lord, Lord Grabiner, to whom the Committee is grateful. But the Committee will be aware that another report was prepared by Mr John Scampion, a commissioner of social security, and placed in the Library of the House of Commons on 24th January 2000. That report was the result of a government-ordered independent inquiry. The recommendations of that report appear to be reflected to a very small extent, except perhaps in relation to Clause 14, in the present Bill. Therefore, the purpose of these amendments is to reflect the concern expressed in the Scampion report that any penalty should include a means of recovering the amount defrauded and should act as a deterrent. Unlike a moment or two ago, in this context we are not speaking of someone who commits fraud and, if his benefits are removed even by 10 per cent, finds that the penalty is severe. Clearly, the people who are engaged in this kind of fraud are well able to bear the penalty. Therefore, in relation to this clause it seems appropriate that, as in other areas of law, criminals should provide redress as far as concerns their ill-gotten gains. Amendment No. 88 and the other amendments in the group relate largely to that point.
	There is a broader point in relation to Clause 14 which has not been touched on other than perhaps at Second Reading. While various aspects of the Bill have much to commend them--although we have concerns about the side-effects which have been debated at length in Committee--on this particular issue we doubt whether the Government have put sufficient resources into combating fraud. I believe I pointed out at Second Reading that the rate of return from further investment would appear to yield far more than the cost of devoting more resources to it. The Bill may turn out to be necessary, but even if such legislation was not being introduced, we should be investing far more in the detection of fraud. All the analyses suggest that that would reduce, not increase, the net burden on taxpayers.
	At earlier stages we spoke about organised crime and so on. In a sense the clause relates to that, although there may be other areas where further investment may produce a good rate of return and reduce the level of crime. However, not only are the level of resources not adequate but the matter is not being pursued with sufficient enthusiasm, if I may put it that way. The Audit Commission's report on protecting the public purse shows that one local authority in eight does not have a whistle-blowing strategy and one in six does not have an anti-fraud strategy in place. That is an extraordinary situation.

Baroness Hollis of Heigham: Has the noble Lord seen the figures which the Audit Commission quotes from the previous year which show by how much local authorities have improved their performance?

Lord Higgins: I am all for them improving performance, but it is still--

Baroness Hollis of Heigham: The noble Lord cannot say that we are not doing anything when as a result of our initiatives the Audit Commission is able to show substantial and valuable progress being made by local authorities since we have come to power.

Lord Higgins: I am not saying that. I am saying that even at this level, although progress may have been made, the reality is that faster progress could be made, and with an increase in revenue compared with the costs. The gap is substantial. There is no reason why more rapid progress should not be made. I pay tribute to the point made by the noble Baroness, but the figures produced by the Audit Commission for the overall situation are still fairly bad. Therefore, we hope that more can be done in relation to the recommendations of the Scampion report.
	In that context, can the Minister tell us exactly where we stand on some of the recommendations in the report? For example, there was a proposal for a single benefits investigation agency in place of BASIS and BFIS. I am not clear whether or not that has happened. Perhaps she could tell us whether it has. Also, is the benefits intelligence directorate now in operation? There was some coverage of the matter in the press a few days ago. The position is not entirely clear.
	In the context of Clause 14 overall, it would be helpful to have a statement by the Minister which is a little more forthcoming than that which my honourable friend Mr Pickles, in another place, received from Angela Eagle, the Minister who replied on the issue of benefit fraud. Against the overall background of the Bill, it would be helpful if we can establish whether as much as can be done is being done to cover the broader aspects of what we have described earlier as "the heavy end of the market". I beg to move.

Baroness Hollis of Heigham: The noble Lord, Lord Higgins, has spoken on specific points as well as to the amendments. Perhaps I may try to deal with them and then come back to some of the broader issues he raised.
	Working while claiming is the most significant area of benefit fraud, costing the taxpayer around £500 million every year in income support, JSA and housing benefit alone. Often fraud exists. We are talking about collusive employers and not other forms of fraud on local authorities, such as in relation to housing benefit and so on. That is a different area of the Bill. I shall not be tempted by the noble Lord to discuss local authorities because we have already done so. We are now dealing with collusive employers.
	However, prosecuting such employers is usually lengthy and always expensive. It is not always the most effective way to tackle the problem. That is why we are going for a swift civil penalty for small-time offenders to streamline the process.
	Current legislation provides a number of offences under which a collusive employer can be prosecuted. But the process is often time-consuming and costly. Even the most straightforward case can be heard in court twice, and sometimes a third time. That ties up resources. So we seek financial penalties in cases which would otherwise have merited going to court, and where, obviously, they have been accepted by the employer as an appropriate alternative.
	It may be helpful by way of example to describe the type of case for which a penalty might be offered. In a recent case, the owner of a sandwich bar deliberately furnished Benefits Agency inspectors with false information relating to the working hours and wages of an employee to support a fraudulent claim for benefit. The fraudulent overpayment in respect of the employee amounted to about £450. On being presented with evidence of his collusion, the employer admitted guilt. The case went to court. He was convicted and ordered to pay a fine of £1,000 and legal costs of £650. In such a case the penalty would save time and resources that may otherwise be engaged in lengthy court proceedings. In addition, it is in everyone's best interests.
	There are cases for which a penalty would not be appropriate and where prosecution would be the first option. For example, in a different case, the owner of a plant hire company deliberately obstructed Benefits Agency fraud inspectors during an investigation and produced a false list of employees to conceal the fact that he was employing benefit claimants. He even allowed employees time off to go and sign on to claim benefit for being unemployed. Investigators working jointly with Customs and Excise also found evidence of dishonest evasion of VAT to the tune of £130,000. Although he had declared zero-rated work for VAT purposes, the employer's turnover was far greater. In addition, he was charging customers VAT which he did not pass on to Customs and Excise.
	Penalties would not replace prosecution for that kind of serious case of collusion; rather they would extend the range of punitive measures for small-time offenders. We seem to be back to small or large and soft or hard. An administrative penalty of between £1,000 and £5,000 offered to a collusive employer as an alternative to prosecution-- with the 28-day cooling-off period previously discussed--sends a strong message that operating in the informal economy to the detriment of fair employers carries a high price. Those who decline the offer of a penalty would go to court.
	I turn to Amendments Nos. 88, 89, 90, 91 and 92. The amendments have the effect of undermining the purposes of the clause. They add complexity to the scheme and could, conceivably, discourage employers from accepting the penalty and, instead, persuade them to take their chances in court.
	The amendments seek to penalise the employer with an extra charge, on top of the penalty, based on the amount of the employee's fraudulent overpayment. Therefore, where the employer's act of collusion results in an overpayment of benefit, he would be offered a bigger penalty. That adds complexity to the scheme which I do not believe is particularly fair.
	The majority of small-time offenders, at which the penalty is aimed, are currently prosecuted for giving false information. The employer's offence is normally to tell a lie at a specific point in time in relation to his employees. However, it is very difficult to tie the individual employee's overpayment to the employer, principally because the employer is unlikely to know what benefit he or she receives. For example, an employer may lie to fraud investigators in respect of one of his or her employee's hours of work or amount of wages. That would constitute an offence. But it does not mean that the employer is responsible for the length of time that the employee's fraud might have gone on, the benefits claimed, or the rate at which they were paid. That is why I believe that it would be unfair.
	In the majority of cases it is unlikely that sufficient proof could be obtained to apply the charge under the amendments. It would make calculating the amount of the penalty more complicated for investigators to administer and for employers to understand. If the additional charge is applied, it is unlikely that an employer would even agree to pay it in preference to going to court, which could show that he was not aware of whatever was going on.
	The clause already reflects a maximum penalty that a court might impose if an employer is prosecuted and convicted. An additional charge, such as that suggested in the amendments, is likely to take the total penalty beyond that of a court sentence. It would, therefore, remove any incentive for an employer to agree to the penalty. It would actually undermine the purpose of the clause which is to punish small-time offenders without unnecessary prosecutions. As I say, that could well be unfair because he would be penalised for parts of the offence that were not committed by him but by the employee. Therefore, this would not be fair to the employer.
	The size of the penalty already strikes the right balance. It acts as a sufficient punishment and deterrent against future fraud, but is a realistic alternative to prosecution. Employers would be given a clear choice: they can accept a penalty of between £1,000 and £5,000 or their case will be submitted to the prosecuting authorities for consideration. As an alternative is always available and the people concerned can decide whether to accept the offer of a penalty, the amount is not a sentence but a consistent benchmark against which the employer can make his own judgment. It also has the advantage of simplicity. They would be able to make that decision without fear that there may or may not be subjective judgments about how long it might have lasted and so on.
	It is very often suggested--although not particularly today--that this is about an undue burden on business. The only people burdened are those who are committing fraud, whose case would warrant prosecution but, because they have admitted guilt, they prefer to accept a penalty to the advantage of all parties concerned in that it releases resources to go after even more complicated cases which are certainly above the £5,000 figure. We think that employers who facilitate fraud should be punished, but the court system is not the answer in every case. That is why we have brought forward the clause.
	I have responded in detail to the amendments and to the clause. The noble Lord, Lord Higgins, ranged widely in his Clause 14 stand part speech. He produced much material that was not even relevant to Clause 14 but was more appropriate to Second Reading. The noble Lord is not sure which path to take--whether he seeks to reduce the impact of the Bill or whether he thinks we are not attacking fraud sufficiently seriously and he wishes to strengthen this Bill. If that is the case, I look forward to seeing amendments from him in due course asking us to increase the penalties. Behind this lies the charge that we are not doing sufficient about fraud, that we could do more and do it faster.
	I take issue with that. Figures released at the end of last month for benefit paid between April 1999 and April 2000 show that losses from fraud and error had dropped by 6.5 per cent. It is now the case that 404 out of 409 local authorities have online access to essential benefit information held on DSS systems. That will save £24 million. Three hundred and eighty-eight local authorities are now receiving housing benefit claims electronically via the department; 246 local authorities are signing up to perform tougher identity checks on housing benefit claimants; 359 local authorities have signed up to the scheme with the Royal Mail to stop housing benefit claimants acting fraudulently by having their mail re-directed from false addresses. This year specialist identity checks will be launched nationally, as piloted in the Balham area since June 1997, where there have been over 200 arrests. Cross-checking DSS records and other state records has already saved over £150 million, and we will be able to extend this role. Over and beyond that, we have made clear that we have targets to reduce income support and JSA fraud by 25 per cent and over the next five to 10 years I believe--and I would need to check--by 50 per cent in all.
	I do not take seriously the charge made by supporters of the previous government, who for 18 years did very little about fraud. It has been left to an in-coming Labour Government to tackle something that corrupts the system. I think that it will be confirmed by the Audit Commission that local authorities in particular, but government in general, have made very substantial progress--more in three years than in the preceding 10 years--in trying to eradicate fraud. Therefore I do not take the noble Lord's complaints on this front seriously.
	The noble Lord asked about the Scampion report and why no single investigation agency is being established as recommended. We have set up a new fraud intelligence unit as recommended by the Scampion report. It is headed by a former deputy head of MI5, a point which amused your Lordships previously. We have set up a new chief investigator's office, as was recommended. Scampion has welcomed what we have done and regards our progress as very acceptable indeed. I hope that I have addressed the points raised by the noble Lord. Indeed, I have tried to answer some of the points that have nothing to do with Clause 14. I have done so in the spirit of dissemination of, I hope, useful and accurate information.

Lord Higgins: Some of what the noble Baroness said was helpful. I am still concerned about her reaction to Amendment No. 88 and related amendments. It seems clear that the Government are so enthusiastic about the proposals for a quick penalty settlement rather than going to court that in a number of cases the fact that a penalty is imposed will not cover the loss to the Exchequer of the fraud which has taken place. The Scampion report makes it clear that any penalty should include a means of recovering the amount of funds that have been defrauded. The noble Baroness seems to be setting her face against that proposal on the grounds that, if we did that, people would not settle for a penalty and they would have to go to court.

Baroness Hollis of Heigham: That was one point. The second point, which was more substantial, is that I thought it was unfair. The point is that the employer will have committed one offence--lying about the hours and wages of an employee. It is not necessarily the case--although it can be--that the employer is then responsible for the amount of benefit subsequently defrauded. That is the responsibility of the employee. To connect the two would be to punish the employer for an offence over which he does not have personal and direct control.

Lord Higgins: If he had not committed the offence of colluding in the fraud, the fraud would not have succeeded. The Exchequer would not have lost the money. The penalty imposed on an employer would be the amount of money the Exchequer had lost as a result of his collusion. He is a party to the fraud. If he were not a party to the fraud it would not take place.

Baroness Hollis of Heigham: He was a party at the opening stage of the fraud; he is not a party necessarily at all subsequent stages. I am very surprised by the noble Lord, Lord Higgins. Far be it from me to take the line of the Conservative Party about burdens on business, but to hold the employer subsequently responsible for everything that happened after he had told an initial lie--which could involve huge sums of money, and he may have had no knowledge that it was being done in that way--would seem to be not appropriate justice.

Lord Higgins: I understand the noble Baroness's argument. Nonetheless, the reality is that if he had not told this little lie, in the words of the noble Baroness, the fraud would not have taken place. Taxpayers are bearing the consequence of him having told that lie, which does not seem in that context so little. I shall think about what the noble Baroness has said. It does not seem to me that the penalty that will be imposed is other than one which would result from the action which the offender has taken. I shall consider carefully the point that the noble Baroness has made.
	On the broader point raised by the noble Baroness, there is concern about the extent to which local authorities seem not to be pursuing the matter with appropriate enthusiasm. We have not opposed the Bill. We continue to take the view that if we can deal with the problems of the side effects it will be a worthwhile Bill and one which will reduce the burden on the taxpayer. I shall consider what the Minister has said. I may wish to return to the matter at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 89 to 93 not moved.]
	Clause 14 agreed to.
	Clause 15 [Offence of failing to notify a change of circumstances]:

Baroness Nicol: In calling Amendment No. 94, I have to point out that if it is agreed to I cannot call Amendments Nos. 95, 96, 97 or 98.

Lord Astor of Hever: moved Amendment No. 94:
	Page 20, line 18, leave out subsection (2).

Lord Astor of Hever: I rise to move Amendment No. 94 and to speak to Amendments Nos. 95, 96, 97 and 98. As Clause 15 is currently drafted, there is a danger that it has been drawn too widely. It may bring within the strict terms of the offence people who work for housing associations who have no criminal intent and, through no fault of their own, may find themselves doing something illegal. I think of housing professionals, such as housing officers working for housing associations among others. What will be the position of these workers who have entered into a relationship of professional confidence with their client, probably about an unrelated matter, and it then becomes apparent during the course of a confidential interview that a change in their benefit status has occurred? Will they be compelled to report the change--at the risk of criminal sanction--or break their client confidence?
	Many charities and supported housing projects rely on direct payments of housing benefit for their financial viability. They also rely on their reputation for complete client confidence. We seek to protect those people. They are also precisely the same categories where the landlord relies on direct payments because of the transient nature of the clients. Giving up direct payments is not an option.
	The consequences that would flow from the conviction of such people could be catastrophic for both themselves and their employer. Officers would find it difficult to find work in the sector and there are several dire consequences for landlords as well. First, as a corporate body, they would also be liable for the same offence. Secondly, those in control, such as the manager or the trustees of the housing association, would also be liable. Thirdly, the landlord's right to receive any direct payment could be placed in jeopardy. That could cause administrative chaos, disruption to tenants and a cash-flow crisis for the landlord, especially if it is a large housing association, as the only option would be to pay each tenant individually.
	The current offence of failing to report a change of circumstances has a safeguard against what I have described but it is swept away by the clause. Under the current offence, a person with "reasonable excuse"--broadly speaking, a person with no criminal intent--would not be at risk of prosecution; hence the inclusion of the words "without reasonable excuse" in the amendment. The proposed subsection does not undermine the intention of the Bill but it avoids a situation whereby those without criminal intent find themselves within the strict terms of the offence.
	I look forward to the Minister's clarification on these points. I beg to move.

Baroness Hollis of Heigham: I am slightly concerned. I have an extremely long speech which addresses each of the amendments but at no stage does it refer to housing associations or charitable bodies, which were the substance of the noble Lord's concerns. If the noble Lord will allow me, I shall give a brief reply. If my answer does not meet his concerns, I shall cover the issue in correspondence and come back to it at Report stage. I do not wish to waste the time of the Committee by going through cases about widows and so on which have not been raised by the noble Lord.
	The noble Lord asked whether professionals could be guilty if they did not pass on information--in other words, would there be third party liability. The answer is no. The liability occurs when the third party knows that the change affects benefits and causes or allows the beneficiary not to report it. Third parties are not responsible if they do nothing and the claimant fails to report the change.
	I think that I have addressed the major issue raised by the noble Lord. I can quite understand where he is coming from and the worries that organisations might have on this issue. If he needs any further clarification, I shall be happy to follow it through with correspondence; and, if necessary, he can return to the matter on Report.

Lord Astor of Hever: I am grateful to the noble Baroness for that reply. We have received most of our briefing from the Chartered Institute of Housing. I should like to discuss the noble Baroness's response with the institute and possibly come back to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 95 to 98 not moved.]
	Clause 15 agreed to.
	Clause 16 agreed to.

Lord Higgins: moved Amendment No. 99:
	After Clause 16, insert the following new clause--
	:TITLE3:("Miscellaneous
	:TITLE3:ANNUAL REPORT BY SECRETARY OF STATE
	.--(1) The Secretary of State shall--
	(a) undertake an annual assessment of the level of benefits fraud and related issues; and
	(b) lay a report of his findings before each House of Parliament.
	(2) The first report shall be submitted no more than 18 months after the commencement of this Act.").

Lord Higgins: In moving this amendment, it may be helpful to consider also Amendment No. 101. Amendment No. 99 suggests that the Secretary of State shall undertake an annual assessment of the level of benefit fraud and related issues and lay a report of his findings before each House of Parliament, starting not later than 18 months after the commencement of the Act. We are all concerned about the level of benefit fraud and the extent to which improvements are being made in dealing with it. Therefore, it seems appropriate, following the passage of the Act, that there should be some form of annual assessment as to what progress is being made. An annual report would enable that to be done.
	Similarly, Amendment No. 101 provides that it shall be the duty of an authority administering housing benefit or council tax benefit to make a report stating the level of fraud, the number of cases, and so on. Despite the progress which the noble Baroness rightly said has been made over the past few years, the level of fraud is a cause for concern. That is particularly so in relation to local authorities where the degree of enthusiasm between one authority and another seems to vary considerably. Given the importance of housing benefit fraud and the problems associated with it, one very much hopes that further progress will be made. However, it seems to be a question of raising those local authorities which are not performing well to the level of those which are taking the matter seriously.
	Some of the situations which I described earlier give one cause for concern. What I have proposed would be an appropriate way of monitoring the way in which the Bill is operating and, more generally, the way in which we are tackling these problems. I beg to move.

Baroness Hollis of Heigham: On the face of it, the new clause inserted by Amendment No. 99 seems reasonable. It is only right that the department should measure the level of benefit fraud and report its findings. But we already do that. The new clause is flawed in two respects. First, it would require the department to do significantly less by way of measurement of the level of fraud in the most vulnerable benefits--income support and jobseeker's allowance--than it does at present and will do in relation to housing benefit from April. Therefore, the noble Lord's amendment, far from encouraging us to ratchet up our battle against fraud, would encourage us to ratchet it down.
	Secondly, it could potentially weaken the independence of our estimates. We currently measure the level of fraud and error in IS and JSA not on an annual basis, as proposed in the new clause, but continuously throughout the year. Each year more than 30,000 cases are closely examined by specially trained officers to establish whether benefit is being paid correctly and, if not, why not. From April this year we will launch the first ever programme to measure the level of fraud and error in housing benefit across all 409 local authorities on a continuous basis. We measure these benefits--or will measure in the case of housing benefit--on a continuous basis because we know that they are most prone to fraud and error; otherwise, we would have snapshots, with the fraud running for many months.
	That is not to say that we ignore other benefits. We are currently running an exercise to measure the level of fraud and error in incapacity benefit. The results will probably be published in the summer. In consultation with the National Audit Office, similar exercises will in future be conducted on other benefits. Therefore, we hardly need a statutory requirement to measure levels of fraud and error in benefits. It is an integral part of our business. The fact that we have developed a robust regime for measuring levels of fraud and error has enabled us to set tough targets for reducing losses in our public service agreement.
	In the past the department had a multitude of targets for its anti-fraud activity--the number of visits, the number of fraud referrals, the weekly benefits savings from detected fraud, and the number of claims withdrawn. Those targets generated lots of paper but they were all about measuring activity rather than success in removing fraud from the system. Now we have just one target--the one to which I referred in our previous debate--by which people can judge the success of our anti-fraud strategy; that is, to reduce losses in the two most vulnerable benefits, IS and JSA, by 25 per cent by March 2004 and by 50 per cent by March 2006. Fifty per cent is the standard we are setting ourselves. I cannot conceive that anyone, including the noble Lord, Lord Higgins, will not agree that that is a most challenging target by which to be judged. Nothing in the noble Lord's amendments would increase our ability to meet that; indeed they would actually reduce our capacity to do so.
	When we came to power in 1997 we made an important change in the way in which our estimates of the level of benefit fraud are published. They are now published by the Office for National Statistics. This may seem a trivial point but it is not. In the past, benefit fraud figures could be said to have been used as a political football, but any publication by the Office for National Statistics is subject to a strict protocol under which Ministers have no say in either its content or the timing of its release. This very important safeguard of complete independence from the DSS or any suggestion that figures were being manipulated or delayed just before a by-election, or anything like that, would be lost under this amendment if the department were to take back responsibility for publishing the benefit fraud figures. So I think that on that count also the noble Lord, Lord Higgins, would perhaps wish to reflect on the wisdom of the amendment.
	Amendment No. 101 proposes the annual reporting of fraud and a statement of annual targets. What it would achieve would be to drag back the system on which we are now making good speed. It would return us to old and ineffectual standards of measuring and tackling fraud. The proposal, with reliance on such yardsticks as the level of fraud detected and the number of fraud cases identified, represents precisely the system we have abandoned because it has not worked as successfully as it should. Under that system--the system the noble Lord wishes to resurrect--these were the only standards by which the Government could measure the levels of fraud and gauge success in tackling it whereby high rates of detection would lead to rewards.
	There is an inherent contradiction here, and perhaps the noble Lord could help me. If the figure for detected fraud is up, what does this tell us? Have the investigators been doing a good job and should they be rewarded or have the gatekeepers, who should have prevented fraud from entering the system in the first place, been doing a poor job, enabling levels of fraud to rise? If we relied on detection rates for our measure, we would be admitting defeat before we started. We would be saying that fraud is endemic and cannot be beaten, and more and more we would find it after it had happened; we would be chasing after it.
	These are not just my criticisms; they are the criticisms of the Public Accounts Committee, the Audit Commission and the National Audit Office. So I am surprised that the noble Lord seeks to resurrect a system which has been so comprehensively criticised by all the relevant independent agencies other than government themselves.
	This is not our approach. We think we should be reducing fraud by prevention and deterrence as well as by detection, which is why we have introduced the Bill. That is why we have a singular indicator of success. The public service agreement sets a target for the reduction of fraud and error relating to the two major benefits of income support and JSA of 50 per cent by 2006. We measure progress towards that target not by levels of detection but by a programme of statistically-valid research--the area of benefits reviews. There will be estimates of the amount of fraud in the system produced by the Government's statistical service, not by the DSS, not annually but monthly. These reports show that we are starting to win the battle by a reduction of 6.5 per cent, and I should say that the National Audit Office has given its support to the approach of setting targets for reducing fraud and error based on this form of measurement.
	We are extending the same methodology to housing benefit, and once the scheme is in place we fully expect to see a significant reduction in fraud and error. I could go on to speak of housing benefit and so on, but I hope the noble Lord will now agree that his amendments would take us back to the system that existed before the criticism was applied that we were rewarding people for detecting fraud, that we would go for annual measurement rather than regular and continuous measurement and for independent statistics whose timing could not be "arranged" to suit the convenience of politicians. I hope that in view of all that, the noble Lord may feel able to withdraw his amendment.

Lord Higgins: The replies of the noble Baroness during our debates have varied somewhat in quality. Some of them have been extremely good, because she has recognised the force of the argument in a number of cases and has agreed to return at Report stage to the most important set of issues that we have been considering. We shall look forward to seeing in exactly what form she produces amendments. As far as these amendments are concerned, I think we have had one of her better replies, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 100 and 101 not moved.]
	Clauses 17 and 18 agreed to.
	Clause 19 [Commencement]:
	[Amendments Nos. 102 and 103 not moved.]
	Clause 19 agreed to.
	Remaining clause and schedule agreed to.
	House resumed: Bill reported with amendments.

Business

Baroness Amos: My Lords, as consideration of the Social Security Fraud Bill is now complete, this evening's Unstarred Question is no longer restricted to the one hour available for the dinner break. Instead, a limit of one and a half hours will apply. The change does not affect the time allocated to the noble Lord, Lord Phillips of Sudbury, or that allocated to my noble friend Lord McIntosh of Haringey, but for each of the other speakers the time available is increased from four to seven minutes. However, if noble Lords have already prepared four-minute speeches and would prefer to avoid the inconvenience of extending them at such short notice, I can assure them that they will attract no criticism from these Benches.

Earnings Differentials

Lord Phillips of Sudbury: rose to ask Her Majesty's Government what dangers they see in the widening differentials in earnings, and what steps they propose to take to address them.
	My Lords, in an ever more materialist world money has truly become our golden calf. One consequence is that people increasingly judge themselves, and are judged, by their earnings.
	To some degree, 'twas ever thus, but because traditional ideologies, both religious and political, are ebbing or have disintegrated, and with them their values and beliefs, the money/esteem correlation has intensified. Though the impact is gradual, one day the old moral capital will run out unless replenished; but by what? That is our challenge.
	Britain is also experiencing a simultaneous decline in traditional, organic communities which has no less an impact. They are being overtaken by highly selective ghettoes notable for their sameness of aspiration and lifestyle. The new settlements do not offer the involuntary experiential learning which is a gloriously unavoidable part of the knockabout traditional community--comprising people of all ages, types and circumstances--which perforce broadens horizons and sympathies
	On top of all this, the high flyers now work under extreme pressure and competitiveness. Not before time, people have woken up to the fact that the extraordinary remuneration which hundreds of thousands currently enjoy comes at a very high personal--and societal--price. It is a world where enough is never enough.
	Yet, segregated though the City in many ways is, it is no longer the secret garden which it was until well into the television age. Today, its excesses are trumpeted by the media and exalted by the TV soaps. Even the poorest and most excluded know that last Christmas, Morgan Stanley gave over 50 of its staff bonuses of £1 million each. Last year, around 50 Goldman Sachs partners received over £10 million on flotation. Literally thousands of legal, accounting and consultancy professionals now regularly earn over half a million pounds a year.
	Perhaps I may turn to a key comparator with the most highly paid: schoolteachers. While the leaders of commerce, industry and the professions have gorged themselves over the past few years in particular, our schools--the very foundation of our future hopes--are desperately struggling, despite the committed efforts of David Blunkett. While the directors of major companies have seen their salaries soar over recent years, typically by between 15 per cent and 20 per cent annually, leaving the 1999 median figure for major public company chief executive pay at around half a million pounds with options worth around another 20 per cent, teachers have languished. When Douglas Houghton adjudicated on teachers' pay in 1974, his committee decided that their earnings should be 37 per cent above the national average. Today they are a mere 4.5 per cent above the average. Their recent 3.7 per cent pay settlement was little more than the national average and radically less than the 21 per cent awarded to Scottish teachers, spread over three years.
	Although the Government admit to teacher vacancies of around only 1,000, the NUT calculates that the number of unfilled permanent posts is nearer 9,000 in London and 20,000 nationally. Even in my home county of Suffolk, which has many advantages, vacancies in maths, languages and CDT often attract no suitable applicants. That is a common predicament. Many teachers have to be imported from South Africa and other Anglophone countries. Many travel up from Wales every day to teach in London schools, some of which are now talking about a four-day week. Primary schools have also had to employ a sizeable proportion of temporary teachers from foreign lands. Supply teachers, like contract nurses, are at best stop-gaps.
	On top of all this lies the bureaucratic overburden which demoralises the profession and which is intensified by the salary-related low esteem in which teaching is held--though not by parents--after years of media and political drubbing. What is true of teachers is no less true of social workers, nurses and health workers, the police and many other groups.
	What of the poor? Some say that they have no further to fall, so what does it matter if the top dogs get ever bigger kennels? But resentment at life's disparities can become so acute that those who feel it are incited to aggressive and selfish behaviour which only adds to the crime statistics and general despair. It is no accident that aggression and selfishness are also key attributes of today's big earners.
	Although some progress has been made--here I give credit to the Government for their determined attempt to get at the roots of social exclusion--we have a long, long way to go. In 1984 the difference between top and bottom earners was eight to one; in 1994, 13 to one; two years later, 16 to one; and in 1999, 21 to one. Far too many millions are still trapped in deprivation--pensioners, single parent families and young, unqualified school leavers. I shall say nothing of secondary poverty.
	One cannot, with 10 minutes on this subject, do more than pick and skim. I look forward to hearing the contributions from other noble Lords on these and many other aspects of this complex topic, not least about the continuing disparities between male and female employees.
	Perhaps I may finish with some suggestions--I hesitate to call them proposals--for further discussion as regards ways to mitigate the widening gulf in earnings. First, although belief in prices and incomes policies, and indeed in taxation, as redistributive tools has largely dissipated, it seems to me to be indefensible that a Labour Government should not have done something to increase taxation on pay in its upper reaches, say, over £100,000 a year. It would be a valid symbol--not unimportant in politics. It would hardly touch the productive economy, and it would raise funds, for example, for teachers' salaries or simply for more teachers.
	Although the Cadbury, Greenbury and Hampel reports on executives' pay have been useful, consideration should be given to encouraging public companies to include on their remuneration committees at least one unconnected outsider with conceivably an employee representative as well. Companies should also be encouraged to develop and publicise top and bottom earnings ratios.
	Section 309 of the Companies Act should be extended so that directors have regard not only to shareholders and employees and their interests, but to the communities of which their companies are a part, and to society as a whole. Capitalism cannot and does not deserve to survive in its present detached state. I say that in full knowledge of the excellent work of business organisations such as Business in the Community and the Prince of Wales Business Leaders Forum.
	The public sector should also encourage a more holistic relationship between companies and society by withholding contracts from those which ignore their duties as corporate citizens. Perhaps I may add that some companies are now asking their solicitors what they do by way of pro bono work as one aspect to be considered in the award of contracts.
	Some are even talking of putting an absolute cap on public company pay. That could well cause more problems than it solves, but it should be examined. However, no one, I think, resents the earnings of he or she who has taken great risks when starting up and running a new business. Boards of companies could be encouraged to assess their own performances in terms of softer performance indicators, along the lines of social auditing now being developed by forward-looking companies. Ethical investments, in which I repose great long-term hope, should be encouraged by every means, while sustainability in its widest sense should become the watchword.
	The CBI, the TUC and the Institute of Directors might be encouraged to set up a joint monitoring unit for top pay, which could provide a much-needed and authoritative statistical pool, plus a focus for comparative critiques.
	Noble Lords will have noted that few of these suggestions rest on legislation. That is no accident. It is increasingly apparent that government can do only so much. Ultimately, men and women in business and the professions must, in particular in the ethical sphere, shift for themselves--albeit with deft government encouragement.
	I still believe in the parable of the mustard seed and the power of the individual exemplar, even in this intractable field. That is because no endeavour is more important for the fair and free society which I suspect we all yearn for than this.

Lord Griffiths of Fforestfach: My Lords, the noble Lord has raised an extremely important subject. His speech was far more wide-ranging than I had thought would be the case. Given the inadequate time for our contributions, it will be difficult to tackle the issues which he has raised. Furthermore, this area is something of a minefield. However, perhaps I may begin by saying that I firmly believe that economic life must take place within a framework of equity and morality, as well as of opportunity. I am convinced that society comprises far more than merely a collection of individuals making their livings in labour markets. To think of society in those terms undermines our view of the society in which we live.
	On the other hand, we need to be extremely careful about drawing conclusions regarding fairness from the behaviour of earnings differentials. Those are the result of a host of different factors relating to skills, occupation, risk-taking, changing technologies, shortages and so forth. In many cases, the markets are, quite simply, out there. I have served on the boards of around 10 companies. Over the past few years, I have become involved in the appointment of chief financial officers and chief executive officers. Frankly, if one wants someone who is good, one has to pay the market price. For a chief financial officer, that may be £250,000 a year. There is no way of getting around it because that is the reality of the market.
	I recognise that, over the past 25 years, we have seen a general trend towards the widening of differentials, but at the same time, average incomes have also been increasing. We have seen a remarkable increase in prosperity over the same period. I doubt whether we would have had that prosperity had we not had the increase in the differentials.
	However, I recognise that there are dangers. I do not see a danger in simply looking at income or earnings differentials, but I see two particular dangers in the UK at present. First, there is the unacceptably large number of people who are employed in the services sector on relatively low pay, however one defines that. Secondly, there are specific occupations--I single out education and health--which are dominated by the public sector, in which differentials have moved, as the noble Lord said, against these professions so that many people feel devalued and rejected. I accept that and I accept everything that has been said about the statistics on teachers and the work done by Professor Smithers.
	There are certain steps the Government can take to alleviate the situation, but what would not help would be a significant increase in the minimum wage. If that happened, one may well find unemployment rising among the very people one was trying to help. Further, I very much doubt whether having shareholders' meetings vote on compensation packages and long-term incentive plans for executives, which are very complicated, would improve the situation. One has to accept that executives should run the company. If you think they are doing a bad job, you should remove them.
	The Government could do two things. First, in terms of low-paid jobs, it seems to me that the only way of increasing the compensation of the low paid is to increase their skills. Here I declare an interest as the chairman of two companies--one in the field of healthcare and the other in the field of property and services--in which we are trying to increase the skills of the low paid so that we can compensate them more. If the Treasury were to give greater tax breaks or incentives for individuals to invest in themselves, or for companies to invest in training, that would be a very positive move.
	Secondly, in terms of education in the public sector, I spent 12 years teaching at university and I have always felt that there was an unholy alliance between teacher unions--including university teacher unions--and the Treasury. There was a narrowing of differentials. I doubt whether this area can ever be adequately tackled without radical reforms in both schools and universities. Much greater freedom should be given to individual schools to negotiate with individual teachers particular rates of pay. In order to bring money in, universities should be given endowments and much greater freedom to charge fees to students. Those are longer term, radical proposals, but, unless we do something of that nature, the problems that have been identified will remain with us.

Lord Sawyer: My Lords, I thank the noble Lord, Lord Phillips of Sudbury for introducing this subject and for asking the Government to consider what is, undoubtedly, a challenging question. I also thank him for the constructive suggestions he outlined towards the end of his speech.
	I hope that the Government see the dangers in the widening differentials in our economy. I accept that addressing such differentials is not an easy matter and, like the noble Lord, Lord Phillips, I agree that legislation is not always an appropriate answer.
	The big thing for the Government--and one of the reasons I am proud to be a member of my party and sitting on these Benches--is that they are committed to tackling injustice and inequalities. In the words of the new Labour lexicon, they are "a government for the many, not for the few". So this is a serious issue for the Government.
	One the major steps taken by the Government has been the introduction of the national minimum wage. This was a flagship policy of the Government, widely opposed by the Conservative Party and by many people in business. It is now widely accepted by business. And it is official Conservative policy to keep the minimum wage should that party be successful in a forthcoming election. That is good. There has been a sea change in the way people think about tackling the problem of low pay.
	There is need for the Low Pay Commission to keep the national minimum wage under review. I do not think that £3.70 is adequate; we should be moving towards £5 an hour. Although the minimum wage may have changed jobs and encouraged organisations and companies to re-train and re-skill, there is no evidence that it has destroyed jobs. We should be aiming towards a rate of £5 an hour. I do not expect my noble friend to agree today, but I certainly hope that he will comment on the matter in his response.
	The working families' tax credit guarantees that all working families have an income of more than £200 a week. It has helped hundreds of thousands of parents find a new financial incentive to work. Measures of this kind to lift people out of the poverty trap and to give fair rewards for fair work must be ongoing. I expect my Government to keep these matters under continuous review.
	In discussing differentials, it is right that we look at salaries and rewards at the top end of the economic spectrum. I am not against differentials; I accept and understand the need for differentials in industry. Nor am I against fair rewards for people doing tough jobs; I accept that that is absolutely necessary. Nor am I against successful companies making profits; that is the basis of our economic success and needs to continue. But I want all this to take place in communities where people can be housed together, where they can share schools and hospitals together and where they can share work and leisure together. I am frightened that if differentials become too wide we will not create the kind of balanced communities in which I would like to live.
	If, for example, the highest-paid director of Kingfisher plc is paid £2,062,000 per year while his employees are paid an average of £7,000 per year--a ratio of 269 to one--or if the highest paid director of Safeway earns £1,214,000 per year and the staff are paid an average of £9,000 per year--a ratio of 130 to one--I do not think we have balance. We have a gross imbalance. On the one hand we have corporate greed and, on the other, exploitation. I am not in favour of that.
	My old friend, Rodney Bickerstaffe, the leader of Unison, used to say to me "How is it, Tom, that in order to motivate people to work harder, you have to pay the rich more and the poor less"? That is still a good question to ask in our society.
	What can the Government do about fat cats at the top? First, they can make their displeasure known at the excessive salaries paid to company directors and point to the thousands of business and community leaders who work on reasonable salaries with a top to bottom ratio, not of 269 to one but of approximately six to one or 10 to one. I work in the housing industry, a business that spends £24 billion per year; £17 billion of public money and £7 billion raised on the private market. That industry has a top to bottom salary ratio of about eight to one. It does a damn good job and the people at the top are well rewarded and well satisfied. We can look at different role models in the economy and outline best practice.
	Secondly, I would argue for the wealth of the nation and its businesses to be invested in the skills and development of the workforce, not in directors' salaries, a point made by the noble Lord opposite.
	Thirdly, we should continuously improve the rights of shareholders to question and hold directors to account. This is on-going legislation that the Government need to keep in hand.
	Fourthly, the Government can encourage wider share ownership. They can encourage a wider understanding among citizens and workers of the choices and decisions made in the boardroom about, for example, directors' pay and rewards, so that people are better informed, better able to comment, better able to pass opinion and better able to create a proper climate for public debate.
	Fifthly, Cabinet Ministers and others in government can continue to argue for the kind of balanced and fair society that we expect from business. We can talk about how we expect business leaders to behave in future in terms of corporate responsibility.
	Finally, the Prime Minister can continue his excellent leadership by example: by keeping Cabinet salaries at a level that will command wide public support, and by ensuring that, at the bottom of the parliamentary scale, we in this Chamber receive some decent remuneration.

Lord Lipsey: My Lords, the whole House will welcome this debate. I thought it particularly appropriate that it should take place in this House, where we are paid nothing and therefore cannot be charged with advancing our own interests as "fat cats". However, I am told by my noble friend Lord Sawyer that that is not the case--therefore, I withdraw the idea immediately.
	I prepared for the debate last night by reading Francis Wheen's biography of Karl Marx. The first obvious point one comes to when reading Karl Marx is that the revolution is taking some time to come because the "crisis of capitalism" appears to have been somewhat delayed. There is a more serious point. It is clear that we are not going to get the kind of crisis of capitalism that Marx believed would occur. There is not a decline in the return on capital, there is not an impoverishment of the workforce, and there is not mass unemployment--all of which Marx predicted.
	However, that does not mean that there will not be a crisis of capitalism. A different kind of crisis can come over an economic system: it is not so much an economic crisis as a moral crisis. It can occur when a system becomes so far divorced from the moral sense of the people who make it work as to become inoperable. "Fat-cattery", as it has been described, is that threat to the system that we have.
	In the time available, I cannot go through all the statistics referred to briefly by the noble Lord, Lord Phillips. I commend Stephen Haseler's recent excellent book, The Super-Rich, which indicates both the scale of the sumptuory incomes now being enjoyed and the speed with which they have increased over the past two decades or so.
	The defenders of capitalism recognise this threat. Its serious defenders have worried much more about the moral threat than about the economic threat. Von Hayek, who wrote The Road to Surfdom, said that as soon as one interfered with capitalism in any way, one was losing liberty, which was a worse moral outrage. There are those who advance the theory of "trickle-down" to point out that capitalism is a moral system. These are threats that capitalist defenders themselves recognise as being the most serious. Therefore, it is right to take them seriously.
	The noble Lord, Lord Griffiths, in a most interesting speech, referred to the role of market forces. It is true that there are reasons in market forces as to why there is more "fat-cattery" today. Let us suppose that for example, the best chief executive is capable of making 10 per cent more out of a company than the second-best. If that company is a £10 million firm in one area of one country, as perhaps it would have been 30 years ago, the extra money involved is quite small and the extra reward that he can command by being that bit better is, therefore, quite small. However, if it is a global company worth perhaps hundreds of billions of pounds, simply to bring about that edge in performance, from the point of view of purely capitalist logic, it is worth giving the chief executive very large amounts of money. That is what accounts for the huge bonuses and share options in the City of London.
	There is also the point that global products tend to concentrate rewards. When a Manchester United footballer could appeal only to a man who got on the Wythenshawe tram, that limited his earnings. When his performance can be seen and charged for world-wide, he is able to command the vastly greater salaries of today's footballers. So there are global forces that are making for fat-cattery. We should recognise them, and recognise that they limit what can be done about them.
	But it is not a question of being helpless. If we compare this phenomenon across countries, we see that it is not universal. I discussed the matter with the noble Lord, Lord Dahrendorf, who is not presently in his place. In Germany, no director of any firm would dream of paying himself the kind of money that we in this country are prepared to pay. The United States has been the most extreme over-payer. The most shocking thing has been the speed with which Britain has moved from being a country that was rather continent in these regards, to being one that is extremely incontinent in the amounts it pays. The 1980s were littered with the names of people who went just too far for their time. Noble Lords will remember Cedric Brown and Mr Dick Giordano of British Oxygen, who was stopped. Now, there seems to be practically no limit. I lay some blame for that on the philosophy of the previous government. I am sorry that it has not come more speedily to an end with the advent of this Government.
	We used to apply crude mechanisms such as an incomes policy in the hope of dealing with the problem. They are limited in the effects that they can have in a global economy. If we tax the very well-off too heavily, they will go and find somewhere else to work. That is well known--although that, too, can be exaggerated, as the noble Lord, Lord Plant, showed in his excellent taxation report for the Fabian Society the other day.
	I merely make this one point, knowing that I am to be followed in this debate by a Bishop. Moral disapproval has a role in all this. If people feel good, if they can go about their lives feeling that they are good people despite the fact that they are enjoying sumptuory sums of money at some cost to other people, they will pay themselves those sums. No mechanism of law, politics or economics will stop them. If society is still prepared to make it clear that it disapproves of such activities, it can to a considerable extent mitigate them.
	We are understanding more and more that capitalism does not stand as an economic system on its own, separate from the society in which it exists. In the same way, if capitalism tries to stand outside a society which is demanding basic moral limitations on the greed of human beings, capitalism is doomed and Marx will be proved right after all. I do not want Marx to be right. Therefore, I hope that, even now, we can learn these lessons and do something to change the moral atmosphere in which we exist.

The Lord Bishop of Oxford: My Lords, I am grateful to the noble Lord, Lord Phillips, for initiating this short but important debate. I entirely accept that an element of differential in earnings is highly desirable. But pay differentials are undesirable if they are so great as seriously to undervalue certain types of work as against others.
	The reasons for regulating differentials are both moral and psychological. From a moral perspective, do salaries reflect the true worth of occupations to society; or do market forces, as emphasised by the noble Lord, Lord Griffiths, result in a distortion of their worth? When we are ill, we know how much we value good nursing. When it comes to the education of our own children, we know how much we want them to be taught by able, well-trained teachers. Traditionally, people have been drawn into such occupations by a sense of service. Alas, that is not what it once was. But even if it were, it would be quite wrong for society to exploit that sense by paying people in certain professions poorly by the standards of society as a whole. Decent salaries do make a difference.
	I remember a time in the 1970s when I chaired a comprehensive school in London. For a short period the salaries of teachers compared favourably with those of doctors. For every post that was advertised we had a good range of able, well-qualified applicants whom we would have been delighted to appoint. That is far from the case now, as the noble Lord, Lord Phillips, rightly emphasised. It is contradictory to value certain professions when we ourselves are in need, or when it comes to our own interests, and as a society to under-value such occupations by rewarding them poorly, and increasingly poorly in relation to the widening differentials in pay to which this debate calls attention.
	From a psychological point of view, excessive differentials can harm both those who are highly paid (do they really think they are worth it?) and the lower-paid. For it can be undermining of those doing a solid job of work, day after day and week after week, for comparatively little reward to see people shooting ahead in the salary scale. It can breed resentment and cynicism. Even worse, it can undermine a person's sense of the worth of what they are doing and the "worthwhileness" of working to the best of their ability. Moreover, that is undermining for society as a whole because it devalues that particular occupation.
	I recognise that we cannot go back to the Middle Ages. Nevertheless, those earlier concepts of "a just wage" and "a just price" remind us that the economic sphere, as the noble Lord, Lord Lipsey, emphasised, is not autonomous or value free, as some used to suggest. There is an ethical dimension, whether people recognise it or not.
	The most persuasive advocates of the market economy, of all political persuasions--including, if I may say so, the noble Lord, Lord Fforestfach, in his earlier writings--have long argued that a successful market economy depends upon the recognition of certain moral values. In short, an unbridled capitalism erodes the moral foundations on which a successful market economy in fact depends. One aspect of that moral dimension is a shared sense of the fairness of things. People recognise that it is fair that if people work hard, have undergone a long training or have exceptional abilities, they should receive commensurate rewards. Of course, there can be a legitimate debate about what is an acceptable range of salaries. A maximum salary that is five times the median salary of manual workers has often been touted in the past, although it is now nowhere near reality, as the noble Lord, Lord Phillips, emphasised. The point, however, is not what judgment should finally be reached but that there should be a widespread sense that the judgment that is reached is, by and large, fair. Widening differentials destroy that shared sense of fairness. As the noble Lord, Lord Sawyer, emphasised, that can create a sense of gross imbalances and, as the noble Lord, Lord Lipsey, said, it can bring about a sense of moral crisis.
	As we know, the world is dominated by a market economy. I accept that a market economy is the worst possible economic system in the world--except for all the others. We therefore need to make it work for the benefit of everyone, not just a minority. Because that market is part of a global economy, any concept of capping salaries is, of course, fraught with difficulties. As has already been said, people who can command more and who want to earn more can simply relocate to a country that does not cap salaries or which has a lower rate of taxation.
	There are real difficulties in this context, and there is not an easy or obvious solution to the problem. Central to this issue is what we might call the lure of the City, where people do indeed work very long hours, but whose salaries--and, even more, their bonuses--have a distorting effect on every aspect of our national life. I remember a few years ago, for example, when I was Dean of King's College, London, being saddened by people who were coming to the end of their research for a doctorate in science--they had spent eight if not 10 years specialising in science--deciding to go into the City rather than to pursue a scientific career because of the comparative rewards.
	We read that million-pound bonuses in the City are commonplace. That has a distorting effect on every aspect of our national life, not least on the housing market in the South East. We need to recover a sense of jobs being done and of occupations being pursued because they are important in their own right and because they are a way of serving society as a whole, as well as a source of personal fulfilment and financial reward. I once lamented to the headmaster of a famous school that the school no longer produced ordinands for the Church of England in the way it once did. "Oh, Richard", he said, "It's not just ordination; the whole concept of service has gone". So a moral and spiritual revolution is necessary.
	As to what steps society as a whole should take, whether through legislation or other means, to close the widening gap in differentials, I honestly do not know. I have listened with great interest and attention to some of the suggestions that have been made in this debate, and I shall listen to others. What I do know is that if that gap continues it will be to the material, as well as the moral, spiritual and psychological, detriment of society as a whole. Important occupations will be under-valued and people's sense of the "worthwhileness" of what they are doing will be undermined.

Lord Haskel: My Lords, the noble Lord, Lord Phillips, is right to be concerned at the high earnings in the City and the low earnings of teachers. The noble Lord, Lord Griffiths, suggested that that is an indication of a dynamic and growing economy. However, a polarised economy is manifestly unjust. Is it inevitable that we have to sacrifice social justice and a more equitable society for a dynamic and growing economy? The answer is definitely no. Social justice and a more equitable society are part and parcel of a dynamic and growing economy. A healthy economy is a moral economy.
	In order to study pay differentials, I did not look at the fat cats; I agree that they are a distortion. I turned to Social Trends. Chart 5.16 on page 103 of that publication illustrates very well what is happening, although it refers to household disposable income. Twenty years ago, a household in the 10th percentile earned £110 a week. In 1998, the same household earned £140 a week. A household in the 90th percentile earned £360 a week in 1981 and £560 a week in 1998.
	What is the reason for that? The noble Lord, Lord Griffiths, touched on the answer. Economists such as the noble Lord, Lord Layard, have shown that during that time the demand for skills became much greater. Globalisation and technology increased the demand for skilled labour and reduced the demand for unskilled labour; hence the differential in wages in the private sector.
	The noble Lord, Lord Phillips, asked what the Government propose to do about that. I think that steps have already been taken. The measures have been described by Robert Reich as a three-legged stool: business flexibility, workforce agility and macro-economic policy. Together, those legs provide a firm economic base.
	By business flexibility, Robert Reich meant the ability of businesses to set wages and to hire and dismiss their workforce with relative freedom and the flexibility to decide where and how to do business. That freedom may have destroyed quite a number of jobs but it has also generated a large number of new ones, particularly in small and medium-sized enterprises.
	That first leg is balanced by the second leg of Robert Reich's stool; that is, workforce agility. That allows employees and workers to move continuously to better jobs--a kind of upward mobility. Of course, education, job skills and training are absolutely critical. Some might say that wage differentials will force people to get skills. That is both unacceptable and untrue; hence schemes such as the New Deal.
	All that is not enough without the third leg, which consists of an economic policy that generates a steady and even demand for all the human resources--skilled and unskilled--in our society. Part of that, of course, is the minimum wage, but so is taxation policy. The noble Lord, Lord Phillips, was right: in Britain, the distribution of original income is highly unequal. I return to Social Trends, which tells us that in 1998, the average income of the top quintile group is 17 times greater than that of the bottom quintile group. But after payment of cash benefits and the deduction of direct taxes, that ratio is reduced to 6:1. That is quite a reduction.
	Of course, we cannot run a modern economy merely by rewarding the fortunate few. It must be achieved by spreading much more widely the opportunity for employment, increased earning power and education. Equal opportunity is central to that. But the right to equal opportunity applies at every economic level. That is why equal opportunity also means dismantling vested interests, restrictive practices and other forms of economic privilege which limit the scope of opportunity for others.
	I believe that in that way the state can be an active counterweight to growing differentials in earnings while, at the same time, securing a healthy, growing and moral economy.

Lord Layard: My Lords, it has been suggested that widening inequality is the price of increased prosperity. I believe that that is wrong, and I wish to illustrate why with two facts. Let us compare the earnings of German and British workers. Among those in the top 40 per cent, the Germans earn hardly any more than the corresponding British workers. However, among those in the bottom 40 per cent, the Germans earn half as much again as their British counterparts.
	Therefore, where does our lack of prosperity come from? It comes directly from low productivity and the low earnings of people at the lower end of our workforce. If we had dealt with the problem of prosperity, we would have dealt also very largely with our problem of inequality.
	Why are our earnings at the bottom end of the scale so low? If we are concerned about inequality, I believe that that is the main question we should consider. As has been said, it is a matter of skills. However, I want to stress that we are experiencing a crisis. It is not a situation that we will survive; it is one that will worsen because the impact of technology constantly reduces the demand for low-skilled labour.
	That may seem obvious. However, every week I attend a meeting where someone states the opposite by pointing out a job where a machine has removed the skill from the task or an unskilled occupation which is growing such as domestic service or some form of low-grade service occupation. Therefore, that person will ask, "What is all the scare about?" I believe that such a view is completely wrong. The examples are right, but the aggregate of the labour market is going in exactly the opposite direction.
	Countless researches show that the demand for skilled labour is constantly increasing while the demand for low-skilled labour is falling. That does not depend on where one takes the cut-off point for skill; it is true wherever one chooses the cut-off point. And it does not depend on which country is studied; the same applies in every country. It is the inexorable result of technical progress and, incidentally, it does not have much to do with globalisation. Therefore, the situation will continue.
	There is a race between the growing demand for and the supply of skilled workers. The latter either keeps up, goes ahead or falls behind. Over the past two decades in Britain and the US the supply has fallen behind the demand. That is the chief force which has brought about the growth of inequality in those two countries. Inequality is growing more quickly there than on the Continent precisely because on the Continent the supply of skill has kept up more easily with the increase in the demand for it. As a consequence, inequality has grown less on the Continent than it has in the Anglo-Saxon world.
	We see that occurring in the educational policies of the Continent, where much more emphasis is placed on minimum standards, and we also see it in the outcome, as has been mentioned previously in this House. One in five people is functionally illiterate in Britain and the US. However, on the Continent, that figure is less than one in 10.
	Therefore, with regard to the question raised by the noble Lord, Lord Phillips, as to what is to be done, I believe that it is clear that the great leveller must be education. There must be more and better education for the less academic half of the population. It is extraordinary--we accept it automatically in Britain--that the academic half receives essentially five years' tuition virtually free of charge beyond the age of 16 while most of the other half receives almost no education beyond that age.
	We should not be happy with the thought that the biggest educational proposal with which any party enters an election is to expand higher education to half the population. I am not against that; it is a terrific idea. However, the main question should concern what we do about the other half.
	Obviously that must be tempered by considerations of expense. Therefore, it is natural to ask what pay-off society would receive from implementing a proper system of vocational education beyond the age of 16 for the second group of people. Fortunately, so far as we are able to compute meaningful social rates of return from different types of education, the answer is that those rates are at least as good in relation to vocational education as they are in relation to A-levels and university education. Therefore, society would receive a pay-off of approximately 8 per cent from each type of education. Therefore, for the time being, more education for the group about which I am concerned is fully justified on pure efficiency grounds.
	However, I want to face the situation. Let us suppose that we did those people proud. At some point, we would probably run into diminishing returns. Then another issue would arise. Is it better to help less able members of society by income transfers or to do so by enabling them to earn a better living for themselves? I believe that economists have done quite a disservice to this type of debate. If there is any question of inefficiency arising from any form of investment, they have tended to advocate income transfers. I believe that that completely underestimates the moral point which has been made in this debate by many speakers.
	There is a strong presumption in favour of people earning their own living rather than living on a transfer--even a partial transfer--because it is so much more dignified and also, of course, less open to the disincentives which arise from income transfers. Therefore, the conclusion which I draw about what the Government can do is that they should implement a concerted programme--it will take 10 years--to make all youngsters sufficiently productive to pay their own way and earn a decent living.
	I have concentrated on the problems of poverty because I consider them to be more serious than the problems of riches. I conclude by turning to the question of people with unusual gifts. As has been said, there is bound to be a market-determined wage and there may not be too much that we can do about the pre-tax earnings of such people. However, as my economist colleagues here know, in economic terms the earnings of those kinds of people largely come from rents. Those earnings are much higher than is necessary to motivate them to do their work. Surely we can tax those rents more seriously than we do at present. Currently the standard rate of tax for most people is 32 per cent, including national insurance. Yet the highest rate of tax paid by the fattest cat is 40 per cent. I cannot see how we can possibly justify that.

Lord Plant of Highfield: My Lords, I thank the noble Lord, Lord Phillips of Sudbury, for introducing this interesting and, as it has turned out to be, most stimulating debate. I had not intended to address the question of the dangers. However, as several speakers have pointed to some of the moral issues, perhaps I may say a word or two about those.
	First, it seems to me that the general level of capitalism or the market economy must be embedded in a type of moral foundation. Equally, the motivations of the market economy, which largely are those of self-interest, can erode those moral foundations, and it is difficult to see how self-interest can repair or regenerate them. I believe that that is a real dilemma. That point has been noted by many thinkers and, as my noble friend Lord Lipsey said, it may well lead to a type of moral or cultural contradiction in capitalism. It requires a moral framework which it cannot itself engender.
	In more immediate, practical terms, associated with high differential salaries is the problem of trying to include the affluent so that they do not detach themselves from common experiences and common forms of provision of goods and services in society, and so that society is not divided between those who are able to afford all kinds of private provision, and the rest of society who have to do other things. It is entirely their right to afford those things, but nevertheless it undermines the sense of social solidarity.The answer is to find a way to include the affluent. Those are two definite dangers, in my view.
	In the last 50 years of the last century there were two approaches to the issue of income differentials. One was the classic, social-democratic view, perhaps associated with Tony Crosland, who said that we should be concerned about relative positions in society, and that the job of government is to seek to diminish inequality by using the fiscal dividends of economic growth to improve the relative position of the worst off, while maintaining the absolute position of the better off, because, otherwise, the better off will not vote for social-democratic governments. That is a levelling up, not a levelling down. On the other hand, the neo liberal or economic liberal approach stated that inequality is a good thing and a necessary feature of a dynamic market economy; and, not only that, but dynamism in the economy is in the interests of the poorest members of society, including the low-paid, because of the trickle-down effect. The strategy is to improve the real wages of the poor, the absolute position of the poor, while increasing the differential between the poor and the rich, as a result of the dynamism of the market and the resulting necessary inequalities. That is the echelon advance view, which is almost the exact opposite of the social-democratic approach, for the reasons that I have given.
	Both of those approaches now seem to be flawed. The social-democratic approach incorporated many good ideas about how to compensate for the consequences of inequality, but it was not so good at explaining the causes of inequality, or suggesting how to remedy the problem of low incomes. Equally, the major problem with the trickle-down theory, the economic liberal theory, is that people have to be equipped to take advantage of the trickle-down mechanism. They have to have skills that are needed in the economy. One of the problems with economic liberalism is that it assumes that the trickle-down effect will occur almost mechanically. The state is prevented from adopting a view that would regard investment in skills, despite the fact that they lead to an individual level of return, as a public good that should involve large public funding. The economic theory seems to run counter to the political theory that the trickle-down effect requires a state to equip people to make use of the trickle-down mechanism, through skilling not just once in life but throughout life, because of the vagaries of the economy; and yet the view of the state inhibits that process.
	I agree with the noble Lords, Lord Haskel and Lord Layard, who stressed the fact that the problem has to be tackled in terms of the skills of the worst paid members of society. I take the point made by the noble Lord, Lord Layard, that the decline in demand for unskilled labour may well be the result of technology. There are those who think that it is globalisation, but it does not matter much in policy terms, because the solution is the same: you will only get around the problem if you increase the skills of the individuals, and you have to do that throughout their lives. It is partly a question of the skilling agenda, but it is also partly an issue of reduction in the rates of taxation at the lower end of the income scale. We now have the 10p rate, but there is also the Government's tax credit programme.
	All of those features fit very much with the diagnosis and the prescription. I am not opposed to the idea of raising the basic rate of tax, in line with the recommendations of the Fabian commissions I have chaired, using that money to take very large numbers of people at the lowest rates of pay out of the tax bracket. Nevertheless, the most necessary fundamental step at the moment is to concentrate on skills and reduce the tax burden on those who are in work but who receive the lowest pay, as the Government are doing at the moment.
	The moral issue is being addressed, but it is very difficult to address it in an open market and in the setting of the global economy. However, it is important to work from the bottom up, rather than to put the cap on the top down.

Baroness Thomas of Walliswood: My Lords, my noble friend vividly drew our attention at the beginning of this notable debate to the inexorable and dangerous increase in the gap between rich and poor and indicated some of the moral problems raised by this phenomenon. The debate has been notable because it has been full of speeches of high academic and moral quality, which is gratifying. It is not necessarily always the main focus of our attention during debates.
	I regret that I cannot follow in that line; I will do something different and talk about poor people, about poverty, about who form the poor, and in particular the problems faced by women due to the gender inequality in remuneration and income.
	I recall that when I first came back to this country in the 1980s, having lived first in the United States and then in the third world, I was struck forcefully by how much the country was beginning to reflect the third world syndrome. It is not just a question of private wealth and public squalor, to which a good deal of attention was drawn at the time, but also the growing gap between the rich and the poor, which was perhaps less vivid at that time but, as my noble friend has said, has marched inexorably onwards.
	It is curious that in a first world country we have almost adopted or been driven to a characteristic which is a major characteristic of a third world country. Of course, the gap is not so great, and I do not pretend that it is, but in many ways the poor in this country are as deprived, relatively speaking, as they are anywhere, although they may be richer in absolute terms than the poor in less developed places.
	I turn now to the disparity between men and women. My thesis is that this gender differentiation is not only bad in itself but it contributes to the financial problems of many families and of whole areas of economic disadvantage. In the time available, it is not possible to lay out the whole statistical justification for this claim and therefore a few facts will have to suffice.
	More than half of all women, compared to a quarter of all men, have income from all sources in the two bottom quintiles of the gross income tables. At the other end of the scale, 30 per cent of men, by comparison with only 10 per cent of women, have incomes in the highest quintile of incomes--gross income from all sources. Those are general figures and they have to be taken with care, but it is part of the general picture. It is supported by a mass of evidence on the earnings gap--not the income gap--between women and men. Six million women work part-time because of their family responsibilities. You may say that it is understandable that they earn 40 per cent less than men in full-time work--"They would, wouldn't they?" However, it is also the case that because of family responsibilities, women reach their earnings peak between the ages of 25 and 29, whereas men reach their earnings peak between 45 and 49. That illustrates the broken nature of women's work. On the other hand, single women with no children earn approximately the same as everybody else.
	Those differentials appear to be grounded in several persistent factors. A recent EOC report, Women and Men in Britain, concludes that gender segregation in the work place and between different sorts of work, including part-time working, is a major culprit. As the EOC puts it:
	"Gender rather than individual skills and abilities continues to be a major determinant in individual economic prosperity".
	The predominance of female employees can reduce the salary scales of a whole profession: consider teaching and nursing. Yes, men and women teachers are paid almost the same, but as several noble Lords have pointed out, the whole profession is not paid enough. Graduate teachers are leaving the profession at quite an early age because by the time they have worked for five or six years the disparity between their earnings and those of their contemporaries is too great to be tolerated.
	There is also compelling evidence that employer pay discrimination is a contributing factor influencing unequal pay. As we all know, that discrimination takes many forms: placing female employees at the bottom of salary ranges when men are placed along the range; job evaluations that discriminate against jobs held predominantly by women; and discrimination in the way in which women are assessed under performance-related pay schemes.
	Perhaps it is not surprising that since the 1980s the pay gap has stuck stubbornly at around 20 per cent. Government research indicates that gender stereotyping still influences choices made and advice given when girls are deciding on their future work. That may include the decision whether to stay at school, as mentioned by the noble Lord, Lord Layard.
	My view is that the disparity between women's and men's earnings is an important part of the wider disparity to which my noble friend has drawn our attention. It reinforces family poverty; it reinforces ideas of women's secondary status; but it does nothing to create that sense of fairness within the community to which so many noble Lords have referred tonight. It also results in the high proportion of women pensioners who live in poverty, because if one is not paid enough, one does not have a private pension and one has to depend entirely on the state pension.
	A large number and a wide range of solutions to the problems have been suggested. I welcome the Government's efforts to deal with the problems of low pay such as the national minimum wage, better skills and improved compensation through state benefits. I should add the pension uprating which my own party has been promoting: £5 for all pensioners; £10 for those over 75; and £15 for those over 80.
	However, I do not believe that those kinds of solutions will ever constitute the whole answer. I end by joining all noble Lords who have called for a lead from government and from society to emphasise how wrong, how immoral and how unfair can be the gaps between the earnings of one group and another. I hope that the Government's new interest in poverty and in gender equality is not a flash in the pan. It must be a commitment for the long term.

Lord Henley: My Lords, I start by referring to a brief remark made by the noble Lord, Lord Lipsey, when he referred to the salaries that Manchester United pays some of its players. I am tempted to ask whether one wants to return to the bad old days of the maximum wage. I see that the noble Lord, Lord Burlison, is still in the Chamber. He will remember the days of the maximum wage. I am sure that all noble Lords will agree that it would be a mistake to return to that form of self-imposed industry regulation of wages just as it would be bad to return to any form of incomes policy.
	I am sure that all noble Lords will also agree that what is true for the entertainment industry--football, music, or whatever--should also be true for the City. We should be wary of trying to castigate certain categories of industry as being wicked fat cats, whereas others, because they earn their living in the entertainment industry, appear to be allowed to earn whatever sums they like.
	I have two relatively brief points to make. First, it would have been helpful if the noble Lord, Lord Phillips, in introducing the debate, had argued that relative poverty has risen substantially under this Government in sharp contrast to the proud promises of that now abandoned campaign song, "Things can only get better".
	Many noble Lords will have seen the recent Rowntree study that showed that the number of people living below the so-called "poverty line"--that is, on half the national average income--has risen to 14.25 million over the past two years. That is 1 million more than in the early 1990s.
	My second point relates to the key advances that the Government have claimed that they have introduced in terms of attacking the problems of poverty. I refer to the points made by the noble Lord, Lord Layard. He said that he wanted to concentrate on poverty rather than on the earnings of those at the top. First, I believe that the immensely complex working families' tax credit increases dependency because means testing is extended over a far larger range of incomes. It seems scarcely credible that people on over £40,000 a year may be brought into the welfare system, as I understand is the case. No doubt the noble Lord, Lord McIntosh, will address that matter. I believe that the Chancellor is creating a new poverty trap in which middle-income families who are promoted or earn overtime will be heavily penalised.
	The Government's other boast is the national minimum wage, to which my noble friend Lord Griffiths of Fforestfach referred. Fortunately, it was introduced at a level lower than originally threatened and therefore has been less disruptive than many feared. Although a future Conservative government will not seek to repeal the national minimum wage, we do not believe that it is a well targeted device for the relief of poverty. We remain concerned at the compliance costs for business and will seek to improve its administration.
	This Government do not appear to mind complication, either in the tax system or in the social security system. They appear to be obsessed with the desire to make people feel grateful to the Chancellor. While pledging to "make work pay", the Government have fundamentally reduced the amount that "work pays" by increasing the tax burden. That has fallen particularly severely on those least able to cope with higher petrol prices and the whole range of the Government's other stealth taxes. The latest figures show that the tax burden on the poorest 20 per cent of households is up from 37 per cent of gross income in 1997 to 40 per cent. We all know that previous Labour Chancellors paid for their public spending excesses by squeezing money from the rich. We all remember the noble Lord, Lord Healey, when he was Chancellor. Under this Government, a typical working family is paying £670 a year more in tax. Labour will never address the divide between rich and poor unless they ease the burden that they have placed on middle-income people and poor alike.
	We on this side of the House have always believed that the best cure for poverty is not a growing welfare state but a growing economy in which we can all share. That is the difference between us and the Government in this debate. Fundamentally, we on these Benches believe that jobs and enterprise best tackle poverty and deprivation. That is why, when we return to government, we shall keep taxes down and invest in key, vital services to help the poor, while spending only what the nation can afford. We shall cut the burden of regulation through regulatory budgets and exemptions for small businesses. We shall abolish taxes on savings for all but higher-rate taxpayers. I believe that that is the way to spread opportunity for all and to help the poor and the middle-earners alike.

Lord McIntosh of Haringey: My Lords, I have to confess that since I was a child I have always had an idiosyncratic view of widening differentials. I have always thought that those who have the most interesting jobs should be paid less than those who have the most boring, difficult, dirty jobs. I still believe that our earnings differentials are entirely the wrong way round. However, I recognise that no society in history has ever taken that view. I recognise that Marx did not take that view; I think that William Morris came close to it. As my children grew older and went into the job market, I told them, sadly, that my ideals did not accord with the way society worked, that they should obtain better skills and earn more money, in which case they would have more interesting jobs. Whichever way round the causal connection operates, that is what it is about. That is the received wisdom.
	Faced with the issue of widening differentials, which the noble Lord, Lord Phillips, has properly introduced to the House, I considered the next part of his question, which is, "What can the Government do about it?" I hope that the House will forgive me if I do not talk about fat cats or about reducing even the relative income of the very rich. I prefer to talk about the point made by the noble Lord, Lord Henley, namely, how best we can make available a large cake in which everybody can share. I should also like to talk about skills and education and about the Chancellor's passion for the reduction of poverty and the elimination in the long term of child poverty.
	There has not been much disagreement about the nature of the problem. As economies become more developed and shift their emphasis to producing goods and services that demand more highly skilled labour, it is possible that the wage gap between the high skilled and low skilled will increase, leading to wider income inequality. In that connection, the noble Lord, Lord Layard, referred to the important role of technology.
	Throughout the OECD the employment rate of low skilled and poorly educated workers has fallen since at least the early 1980s. In the United Kingdom, job prospects for those without skills have declined dramatically. What we are seeing--and I am grateful to the noble Lord, Lord Lipsey, for drawing attention to it--is a version of part of Marx's prediction made more than 100 years ago. It is true that we have not experienced the crisis of capitalism. However, we have experienced continuing pressure towards relative impoverishment of the workforce.
	We know from the social and economic policy of the whole of the past century that if this issue is neglected, differentials will increase. We have seen over the past 20 years not only the relative impoverishment of the poorer parts of our society but, in some cases, and certainly in the United States, an absolute increase in poverty. That means that social and economic policy must very firmly and deliberately be directed towards dealing with that problem. In the United Kingdom, the demand for unskilled labour has been reflected in a fall in the relative wages of unskilled workers. In this country wages have been rising for all points in the earnings distribution, though not in the United States, but the lowest paid have seen only a small increase in real terms. The rise in wage inequality in the United Kingdom since the late 1970s has been one of the fastest of all developed countries.
	One could say that it does not matter if people face only short periods on low pay and have a good chance of mobility into higher paid jobs; but that is not the case. There is evidence that many individuals move between low pay and unemployment, rather than better paid jobs, and that significant numbers are trapped in low pay throughout their working lives. Therefore, our primary emphasis must be on economic stability as the basis of our policy.
	As we outlined at the beginning, the central objective of the Government is to achieve high and stable levels of growth and employment to fulfil Britain's national potential, and to build a stronger economy and a fairer society, to which everyone can contribute, thus benefiting from a share of greater prosperity. I believe that even those who fiercely criticised the way in which we approached this matter almost four years ago will acknowledge that these policies have been remarkably successful. That means that we are able to respond effectively to the challenge imposed by an increasingly global economy, ensuring that all individuals are equipped with the skills necessary to share in global prosperity.
	The argument for greater emphasis on skills is that we cannot compete internationally through low wages. We are committed to encouraging a high skilled, high wage and high productivity economy. That is the only way in which we can compete successfully in the world economy, taking advantage of the fact that some developing countries will naturally have an edge where low cost, relatively unskilled labour is important. If I had the time, I could continue at length on the theory of comparative advantage.
	The noble Lords, Lord Griffiths and Lord Layard, have emphasised that we must ensure that people in the workforce have good basic skills--literacy, numeracy, communication and IT skills. There is a high correlation between those who lack basic skills and unemployment. Even those in employment are likely to earn far less than people with higher skills. We should also ensure that access is available to lifelong learning, so that people have the skills to adapt to changing circumstances and the opportunity to progress up the earnings ladder.
	I do not have time to deal with the range of education and skills programmes--the Excellence Challenge, the Connexions partnership, the strategy for adult basic skills, and, in answer to the noble Lord, Lord Griffiths, who rightly referred to lifelong learning, the individual learning accounts that will be available to one million of the workforce by March next year. It can be said that, in addition to what has been done in traditional school education, the emphasis of this Government has very heavily been on the skills that are necessary for employment in the 21st century.
	We have also implemented reforms to make work pay. Those cannot be seen individually. If we are to consider the danger of poverty, which the noble Baroness, Lady Thomas of Walliswood, rightly emphasised, the reforms must be seen as a package. We have set ourselves the target of increasing the earning power of the lowest paid workers so that they will be in a position to become financially independent and escape poverty. Even low paid jobs will improve employability, and they can be a stepping stone to higher wages.
	As the noble Lord, Lord Sawyer, rightly emphasised, the national minimum wage removes the worst case of exploitation, promotes greater decency and fairness in the workplace and underpins the Government's reforms to the tax and benefit system. The national minimum wage, which we introduced almost two years ago, has benefited between 1.2 and 1.5 million workers. The average increase for those paid less than the national minimum wage prior to its introduction is approximately 20 to 30 per cent. I can update the figures given by the noble Lord, Lord Henley.
	By removing the worst excesses of low pay, the national minimum wage has been a significant factor in bringing about the reversal of the trend of the past two decades when higher gains in pay went to the highest paid. Increases in pay across the earnings distribution for the year to spring 2000 show that earnings of the bottom 10 per cent increased almost twice as fast as the top 10 per cent.
	The national minimum wage has been particularly valuable in low-paying sectors such as retail, hospitality, cleaning and security. I say in response to the noble Lord, Lord Phillips, and the noble Baroness, Lady Thomas, that it has been particularly important for women workers, who make up three-quarters of its beneficiaries. In the year to April 1999, the gap in the average hourly pay of women relative to men narrowed by a full percentage point. That is the largest amount for a decade.
	The noble Lords, Lord Griffiths and Lord Henley, believe that if we were to increase the national minimum wage we should be risking serious job losses. That is exactly what was said before we introduced the national minimum wage. I shall not speculate on future government policy, but I want to record the fact that during the past two years the fears of the Conservative Opposition about the effect of the minimum wage have been effectively disproved.
	The national minimum wage is part of the Government's overall strategy to make work pay. With the working families' tax credit, which is the next part of the policy, it guarantees to every family with children and with at least one person in full-time work a minimum income of £214 a week, or more than £11,000 a year, from April this year. Together, the tax and benefit reforms underpinned by the minimum wage--if we did not have it the taxpayers would pay and not the employers--enabled us to do more than we could ever have done by individual policy.
	The noble Lord, Lord Plant, rightly drew attention to the fact that tax credits are the most effective way of tackling poverty. They can be targeted at low-income households; they can be varied according to family circumstance; and they do not raise the direct cost of low-wage workers to employers. In other words, we could not use the national minimum wage alone and we could not use tax credits alone but the two of them together are immensely powerful. They make low-paid work more attractive to the unemployed and work rather than benefit a more attractive proposition. If we did not have the national minimum wage, employers would take advantage of workers by lowering wages. The national minimum wage ensures a level of fair remuneration in the labour market.
	The 10p rate of income tax is the lowest starting rate since 1962-63. The basic rate is the lowest for 70 years, worth between £60 and £150 a year, with the largest gain for the low paid. In addition, we have increased the threshold for paying national insurance contributions, which means that 1 million low-paid workers no longer pay NICs. Let us add to that what is planned for the next two years. By 2001, a single person on the minimum wage will be £300 a year better off as a result of the tax and national insurance cut. In 2003, we are extending the principles of working families' tax credit to those without children. The employment tax credit will help to support working people without children as well as helping to tackle in-work poverty.
	I acknowledge that I have not talked about high pay. I have followed the wise words of the noble Lord, Lord Plant, who said that it is important to bring up the earnings of those at the bottom rather than to bring down the earnings of those at the top. That attack on poverty is the thrust of the Chancellor's economic policy and has been ever since he took office.
	I do not believe that many people in this country realise the moral passion which enthuses the Chancellor of the Exchequer in his hatred of poverty and inequality. The more that that is recognised, the more it will be recognised that we are indeed attacking the problem, so rightly drawn to the attention of the House by the noble Lord, Lord Phillips.

House adjourned at five minutes before nine o'clock.